Back | WP 5.1 Version | ASCII Version | PDF Version

SECTION 1. DEFINITIONS. In this [Act]:

(1) "Acceptable actuarial cost method" means a recognized actuarial technique used to determine the present value of the benefits and expenses of a retirement program and to develop an allocation of such value to time periods. The term includes the unit credit actuarial cost method, the entry age normal actuarial cost method, the attained age actuarial cost method, the frozen entry age actuarial cost method, and the frozen attained age actuarial cost method. The term does not include the terminal funding cost method, the current funding (pay-as-you-go) cost method, and the aggregate actuarial cost method.

(2) "Actuarial accrued liability" means that portion, as determined by an acceptable actuarial cost method, of the present value of the benefits and expenses of a retirement system which is not provided for by the annual cost of future retirement system benefits and expenses assigned to years subsequent to the date of the actuarial valuation.

(3) "Actuarial value of system assets" means the current value of the assets of a retirement system adjusted, as necessary and appropriate, to diminish the effects of short-term volatility.

(4) "Administrator" means an individual primarily responsible for the operation and administration of a retirement system or, if no such individual is clearly designated, the trustee of the system who has the ultimate authority to operate and administer the program.

(5) "Annual compensation" means the portion of an employee's total earnings from an employer during a system year on which contributions to a retirement program are based.

(6) "Appropriate group of programs" means

(i) for defined benefit plans, a group of retirement programs with the same schedule of contributions and benefits and which shares all risks, rewards, and costs, including all liabilities for benefits; and

(ii) for defined contribution plans, a group of retirement programs which shares administrative and investment functions.

(7) "Beneficiary" means a person designated by a participant or by the terms of a retirement program who is or may become entitled to a benefit under a retirement program, but the term does not include a participant or a person whose only claim to a benefit is that he or she may become a participant in the future.

(8) "Code" means the Internal Revenue Code of 1986, as amended.

(9) "Current value" means fair market value if available and otherwise the value as determined in good faith by a trustee or fiduciary.

(10) "Defined benefit plan" means a retirement program other than a defined contribution plan.

(11) "Defined contribution plan" means a retirement program which provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant's account, and any income, expenses, gains, and losses, and any forfeitures of accounts of other participants which may be allocated to the participant's account.

(12) "Employee" means an employee or officer of an employer.

(13) "Employer" means this State or any political subdivision, or any agency or instrumentality of this State or any political subdivision, whose employees are participants in a retirement program, except that in section 21 "employer" means any employer.

(14) "Fiduciary" means a person who

(i) exercises any discretionary authority to manage the operation and administration of a retirement system or any authority to invest or manage the assets of a retirement system, or

(ii) renders investment advice for a fee or other compensation, direct or indirect, with respect to any assets of a retirement system, or has any authority or responsibility to do so,

except that an investment advisor or principal underwriter of an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) is not a fiduciary solely because any assets of a system are invested in securities issued by the investment company.

(15) "Furnish" means to deliver personally, to mail to the last known place of employment or home address of the intended recipient, or, if reasonable grounds exist to believe that the employer will make a good faith effort to deliver personally or by mail, to provide to the intended recipient's employer.

(16) "Governing law" means state and local laws establishing or authorizing the creation of a retirement program or system and the principal state and local laws and regulations governing the operation, administration, or management of the assets of a program or system.

(17) "Nonforfeitable" means a claim to an immediate or deferred benefit which arises from a participant's service, which is unconditional, and which is legally enforceable against the retirement system.

(18) "Participant" means an individual who is or has been an employee of an employer, who is or has been enrolled in a retirement program, and who is or may become eligible to receive a benefit of any type from a retirement program which covers employees of the employer, or whose beneficiaries may be eligible to receive any such benefit.

(19) "Present value", with respect to a liability, means the value actuarially adjusted to reflect anticipated events.

(20) "Qualified public accountant" means:

(i) an audit agency of this State or of a political subdivision of this State which has no direct relationship with the functions or activities of the retirement system or its fiduciaries other than functions relating to this [Act]; or

(ii) a person who is a certified public accountant, certified or licensed by a regulatory authority of a State.

(21) "Related person" means (i) a spouse, or parent or sibling of a spouse; (ii) a child, grandchild, sibling, parent, or spouse of a child, grandchild, sibling, or parent; (iii) an individual having the same home; (iv) a trust or estate of which an individual specified in subparagraph (i)-(iii) is a substantial beneficiary; or (v) a trust, estate, incompetent, conservatee, or minor of which the person of interest is a fiduciary.

(22) "Retirement program" means a program of rights and obligations established or maintained for its employees by an employer to the extent that by its express terms or as a result of surrounding circumstances the program

(i) provides retirement income to employees, or

(ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond,

regardless of the method of calculating the contributions made to the program, the method of calculating the benefits under the program, or the method of distributing benefits from the program.

(23) "Retirement system" means an entity established or maintained to operate, administer, or manage the assets of one or more retirement programs. [May list state retirement systems and statutes authorizing the formation of systems.]

(24) "System year" means the calendar or fiscal year on which the records of the retirement system are kept.

(25) "Trustee" means one or more individuals who have the ultimate authority to manage the operation and administration of a retirement system or to invest or manage the assets of a system.

SECTION 2. SCOPE.

(a) Except as otherwise provided in subsection (b), this Act applies to all retirement programs and systems.

(b) This Act does not apply to:

(1) a retirement program that is unfunded and is maintained by an employer solely for the purpose of providing deferred compensation for a select group of management employees or employees whose compensation places them in the top five percent of that employer's employees;

(2) a severance pay arrangement where payments are made solely on account of the termination of an employee's service and are not contingent, directly or indirectly, upon the employee's retiring;

(3) a supplemental retirement income arrangement where payments are made solely to supplement the benefits of retired participants or their beneficiaries to account for some portion or all of the increases in the cost of living since retirement; the employer is not obligated to make the payments under the terms of the retirement program providing the basic benefits; and the payments are made out of the general revenues of the employer, out of a separate trust fund established and maintained solely for that purpose, or out of a special appropriation received by the employer for that purpose;

(4) an arrangement or payment made pursuant to a coverage agreement entered into under section 218 of the Social Security Act (42 U.S.C. 418);

(5) an individual retirement account or individual retirement annuity within the meaning of section 408 of the Code;

(6) a retirement program consisting solely of annuity contracts or custodial accounts satisfying the requirements of section 403(b) of the Code;

(7) an eligible deferred compensation plan satisfying the requirements of section 457 of the Code; or

(8) a program maintained solely for the purpose of complying with applicable workers' compensation laws or disability insurance laws.

SECTION 3. ESTABLISHMENT OF TRUST.

(a) Except as otherwise provided in subsections (b) and (c), all assets of a retirement system shall be held in trust. The trustee has exclusive authority, consistent with its duties under this [Act], to invest and manage the assets of the system. (b) The requirements of subsection (a) do not apply to:

(1) assets of a system which consist of insurance contracts or policies issued by an insurance company qualified to do business in this State; or

(2) assets of such an insurance company or assets of a system which are held by such an insurance company.

(c) In this section and sections 6 to 8:

(1) if a retirement system invests in a security issued by an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), the assets of the system include the security, but not any assets of the investment company; and

(2) if an insurer issues a guaranteed benefit policy to a system, the assets of the system include the policy, but not any assets of the insurer. In this paragraph:

(i) "insurer" means an insurance company, insurance service, or insurance organization qualified to do business in this State, and

(ii) "guaranteed benefit policy" means an insurance policy or contract to the extent that the policy or contract provides for benefits the amount of which is guaranteed by the insurer. The term includes any surplus in a separate account, but excludes any other portion of a separate account.

SECTION 4. TRUSTEE POWERS. In addition to other powers granted by law, the trustee has exclusive authority, consistent with its duties under this [Act]:

(1) to establish a budget sufficient to fulfill its duties and, if necessary, to draw upon assets of the retirement system to fund the budget;

(2) to obtain [by employment or] by contract the services necessary to fulfill its duties, including actuarial, auditing, investment, and legal services; and

(3) to procure and dispose of the goods and property necessary to fulfill its duties.

SECTION 5. TRUSTEE AND AGENT DUTIES REGARDING DELEGATION OF FUNCTIONS.

(a) A trustee may delegate functions that a prudent trustee of comparable skills could properly delegate under the circumstances. The trustee shall exercise reasonable care, skill, and caution in:

(1) selecting an agent;

(2) establishing the scope and terms of the delegation, consistent with the purposes and terms of the retirement system; and

(3) periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the terms of the delegation.

(b) In performing a delegated function, an agent owes a duty to the retirement system to comply with the terms of the delegation and, if a fiduciary, to comply with the duties of section 7.

(c) A trustee who complies with the requirements of subsection (a) is not liable to the retirement system or to its participants or beneficiaries for the decisions or actions of the agent to whom the function was delegated.

(d) By accepting the delegation of a function from the trustee of a retirement system, an agent submits to the jurisdiction of the courts of this State.

SECTION 6. TRUSTEE DUTIES IN INVESTING AND MANAGING RETIREMENT SYSTEM ASSETS.

(a) Subject to section 8(b)-(c), a trustee who invests and manages retirement system assets shall comply with the duties of section 7 and this section.

(b) A trustee's investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the program or appropriate group of programs.

(c) Among circumstances that a trustee shall consider in investing and managing system assets are the following:

(1) general economic conditions;

(2) the possible effect of inflation or deflation;

(3) the role that each investment or course of action plays within the overall portfolio of the program or appropriate group of programs;

(4) the expected total return from income and the appreciation of capital; and

(5) needs for liquidity, regularity of income, and preservation or appreciation of capital.

(d) A trustee shall make a reasonable effort to verify facts relevant to the investment and management of system assets.

(e) A trustee may invest in any kind of property or type of investment consistent with the standards of this [Act].

(f) A trustee shall diversify the investments of each program or appropriate group of programs.

(g) In investing and managing system assets, a trustee may consider benefits created by an investment in addition to investment return, but the existence of such collateral benefits may only be decisive in making an investment or management decision if the trustee determines that the investment providing the collateral benefits is expected to provide an investment return commensurate to available alternative investments having similar risks.

(h) A trustee shall adopt a statement of investment objectives and policies consistent with the duties of this section for each program or appropriate group of programs. At least once annually, the trustee must review the statement and either change or reaffirm it.

SECTION 7. FIDUCIARY DUTIES. Subject to section 8(c), a fiduciary shall discharge his or her duties with respect to a retirement system:

(1) solely in the interest of the participants and beneficiaries;

(2) for the exclusive purpose of providing benefits to participants and beneficiaries and defraying reasonable expenses of administering the system;

(3) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an activity of a like character and with like aims;

(4) impartially, taking into account any differing interests of participants and beneficiaries; and

(5) in accordance with the governing law of the retirement program and system.

SECTION 8. APPLICATION OF TRUSTEE AND FIDUCIARY DUTIES.

(a) Trustee and fiduciary compliance with Sections 5 to 7 shall be determined in light of the facts and circumstances existing at the time of the trustee or fiduciary's decision or action and not by hindsight.

(b) It is not a violation of section 6 or 7:

(1) for a trustee to return a contribution and interest to an employer or employee, or to make alternative arrangements for reimbursement, if the contribution was made because of a mistake of fact or law;

(2) upon termination of a retirement program, for a trustee to return to an employer any assets of the program remaining after all liabilities of the program to participants and beneficiaries have been satisfied.

(c) If a retirement program provides for individual accounts and permits a participant or beneficiary to exercise control over the assets in his or her account and if a participant or beneficiary exercises control over the assets in the account:

(1) the participant or beneficiary is not a fiduciary by reason of the exercise; and

(2) a person who is otherwise a fiduciary is not liable under section 6 or 7 for any loss, or by reason of any failure to meet the requirements of section 6 or 7, which results from the participant's or beneficiary's exercise of control.

SECTION 9. LIABILITY FOR BREACH OF TRUSTEE AND FIDUCIARY DUTIES. A trustee or fiduciary who [knowingly and willfully] breaches any of the duties imposed upon trustees and fiduciaries by this [Act] is personally liable to reimburse the retirement system for any losses resulting from the breach, to restore to the system any profits of the trustee or fiduciary which have been made through use of assets of the system by the trustee or fiduciary, and shall be subject to other equitable or remedial relief as the court may consider appropriate, including removal of the trustee or fiduciary.

SECTION 10. [OPEN OR PUBLIC] RECORDS AND MEETINGS.

(a) Except as otherwise provided in subsections (b) and (c), retirement system records are [open or public] records subject to [the State Open Records Law].

(b) Data collected and maintained by a system on participants and beneficiaries are not [open or public] records, except for the name, type of benefit, and amount of benefit of participants and beneficiaries who are currently receiving benefits.

(c) Records that disclose a tentative or final investment or other financial decision are not [open or public] records to the extent their disclosure would jeopardize the ability to implement the decision. The records become [open or public] records when their disclosure would no longer jeopardize the ability to implement the investment or other financial decision.

(d) A multi-member body with authority to manage the operation or administration of a retirement system or to manage the assets of a system is a [public body] subject to the [State Open Meetings Law], except that the body may make a tentative or final investment or other financial decision in executive session if disclosure of the decision would jeopardize the ability to implement the decision.

SECTION 11. REPORTING AND DISCLOSURE DUTIES.

(a) The administrator of each retirement system shall publish:

(1) a summary plan description of each retirement program;

(2) a summary description of (i) any material modification in the terms of the program and (ii) any change in the information required to be included in the summary plan description, to the extent the modification or change has not been integrated into an updated summary plan description;

(3) a comprehensive annual report; and

(4) an annual report which contains the schedules described in section 14(c)(1)-(3), the percentages required by section 16(b)(4)(v) for defined benefit plans, and such other material as is necessary to summarize the comprehensive annual report fairly and accurately.

(b) The administrator of each retirement program shall furnish to each participant and to each beneficiary who is receiving benefits under a program:

(1) a copy of the most recent summary plan description, along with any summary descriptions of material modifications or changes described in subsection (a)(2):

(i) within three months after a person becomes a participant or, in the case of a beneficiary, within three months after a person first receives benefits, or

(ii) if later, within four months after the system becomes subject to this [Act], and

thereafter, a copy of an updated summary plan description, which integrates all program amendments, at intervals separated by no more than five years;

(2) the summary description of any modifications or changes described in subsection (a)(2), within seven months of the end of the system year in which any modification or change has been made; and

(3) the annual report described in subsection (a)(4) within seven months of the end of each fiscal year of the system.

(c) The administrator of each retirement system shall make available for examination by any participant, beneficiary, or member of the public in the principal office of the administrator and in such other places as may be necessary to make the information reasonably available to participants, copies of the governing law of the retirement program and system, latest updated summary plan description, summary descriptions of modifications or changes described in subsection (a)(2) that have been provided to participants and beneficiaries but not yet integrated into the summary plan description, latest comprehensive annual report, and latest annual report.

(d) Upon written request by a participant, beneficiary, or member of the public, the administrator shall furnish a copy of the governing law of the program and system, latest updated summary plan description, summary descriptions of modifications or changes described in subsection (a)(2) that have been provided to participants and beneficiaries but not yet integrated into the summary plan description, latest comprehensive annual report, and latest annual report. The administrator may impose a reasonable charge to cover the cost of furnishing copies, and must furnish the copies within 30 days after receiving payment.

(e) The administrator of each system shall file with the [Agency]:

(1) a copy of the governing law of the retirement program and system within four months after the system becomes subject to this [Act] and of an updated copy at least once every five years thereafter;

(2) a copy of the summary plan description within four months after the system becomes subject to this [Act] and of updated summary plan descriptions at the same time they are first provided to any participant or beneficiary under subsection (b)(1);

(3) a copy of any summary description of modifications or changes within seven months of the end of the system year in which any modification or change has been made; and

(4) a copy of the comprehensive annual report and annual report within seven months of the end of each fiscal year of the system.

(f)(1) The administrator of each system shall furnish to any participant or beneficiary, within 30 days of the participant or beneficiary's written request, a statement indicating, on the basis of the latest available information:

(i) the total benefits accrued; and

(ii) the nonforfeitable benefits accrued, if any, or the earliest date on which benefits will become nonforfeitable.

(2) Each participant or beneficiary is entitled to receive only one statement pursuant to a request under paragraph (1) during any system year.

SECTION 12. THE SUMMARY PLAN DESCRIPTION.

(a) The summary plan description and any summary description of modifications or changes under section 11(a)(2) must be written in a manner calculated to be understood by the average participant and must be accurate and sufficiently comprehensive to inform reasonably participants and beneficiaries of their rights and obligations under the retirement program.

(b) The summary plan description must contain:

(1) the name of the retirement program and system and type of administration;

(2) the name and business address of the administrator;

(3) the name and business address of each person who is an agent for the service of legal process;

(5) the name, title, and business address of each trustee;

(6) citations to the governing law of the retirement program and system;

(7) citations to the relevant provisions of any applicable collective bargaining agreement(s);

(8) a description of the program's requirements respecting eligibility for participation and benefits;

(9) a description of the program's provisions providing for nonforfeitable benefits;

(10) a description of circumstances that may result in disqualification, ineligibility, or denial or loss of benefits;

(11) a description of the benefits provided by the program, including the manner of calculating benefits and the benefits, if any, provided for spouses and survivors;

(12) the source of financing of the program and the identity of any organization through which benefits are provided;

(13) the date of the end of the system year and whether the records of the program are kept on a calendar or fiscal year basis; and

(14) the procedures to be followed to present claims for benefits under the program and the remedies available under the program for the redress of claims that are denied in whole or in part.

SECTION 13. THE COMPREHENSIVE ANNUAL REPORT.

(a) The comprehensive annual report must contain:

(1) The name of the retirement system and, if subsection (b) applies, identification of each program and appropriate group of programs;

(2) the name and business address of the administrator and trustee;

(3) the name and business address of each person who is an agent for the service of legal process;

(4) the number of employees covered by the system and, if subsection (b) applies, by each program and appropriate group of programs;

(5) the name and business address of each fiduciary;

(6) with respect to each administrator and trustee, the amount of compensation paid or given, directly or indirectly, by the retirement system during the preceding 12 months and a description of any material interest held by the individual, or a related person, in any material transaction with the system within the last three years or proposed to be effected;

(7) with respect to employees of the system other than the administrator and trustee, the name, title, and business address of the twenty employees or the five percent of employees, whichever is fewer, who received the highest compensation from the system during the preceding 12 months and the information specified in paragraph (6).

(8) with respect to non-employees who have received compensation from the system, the name and business address of the twenty non-employees or the five percent of non-employees, whichever is fewer, who received the highest compensation from the system during the preceding 12 months; the information specified in paragraph (6); the nature of the person's services to the system; and the person's relationship, if any, to the administrator or trustee of the system, any employer participating in the system, or any employee organization representing employees covered by the plan;

(9) the current statement of investment objectives and policies required by section 6(h);

(8) a financial statement in accordance with section 14;

(9) an opinion on the financial statement in accordance with section 15;

(10) in the case of a defined benefit plan, an actuarial statement in accordance with section 16;

(11) in the case of a defined benefit plan, an opinion on the actuarial statement in accordance with section 17; and

(12) if applicable, any statements described in section 18.

(b) In the case of a retirement system that administers or manages the assets of more than one retirement program, the administrator must present the information in the comprehensive annual report so that it reasonably and fairly conveys the financial position of each program and appropriate group of programs and, for defined benefit plans, the actuarial position of each program and appropriate group of programs.

SECTION 14. THE FINANCIAL STATEMENT

(a) The financial statement of the comprehensive annual report must contain the information required by this section for the retirement system or, if section 13(b) applies, for each program and appropriate group of programs.

(a) The financial statement of the comprehensive annual report must contain a statement of assets and liabilities, and a statement of changes in net assets available for retirement program benefits, which must include details of revenues and expenses and other changes aggregated by general source and application.

(b) In the notes to the financial statement, a qualified public accountant shall disclose the following items: a description of the system including any significant changes in the system made during the system year and the impact of the changes on benefits; the funding policy, including, if applicable, policy with respect to a ratio of less than 100 percent between the actuarial value of system assets and actuarial accrued liability, and any changes in the policy during the system year; a description of any significant changes in retirement program benefits made during the system year; a description of material lease commitments, other commitments, and contingent liabilities; a description of agreements and transactions during the system year with any trustee of the system, any employer participating in the system, and any employee organization representing employees covered by the system; a general description of priorities upon termination of the system; and any other matters necessary to present fully and fairly the financial statement of the system.

(c) The financial statement must also contain the following information in separate schedules:

(1) a statement of assets and liabilities aggregated by categories and valued at their current value, and the same data displayed in comparative form for the end of the preceding system year;

(2) a statement of the rates of return on assets aggregated by category over the past one-year, five-year, and ten-year periods, to the extent available;

(3) a statement of receipts and disbursements during the system year aggregated by general sources and applications; and

(4) a schedule of all assets held for investment purposes on the last day of the system year aggregated and identified by issuer, borrower, lessor, or similar party to the transaction and providing the following information as relevant: Maturity date, rate of interest, par or maturity value, if in default or classified as uncollectible, number of shares, cost, and current value.

SECTION 15. OPINION ON THE FINANCIAL STATEMENT.

(a) The trustee shall engage an independent qualified public accountant who shall conduct such an examination of any financial statements of the retirement system, and of other books and records of the system, as the accountant may consider necessary to enable the accountant to form an opinion as to whether the financial statement and schedules required to be included in the comprehensive annual report are presented fairly and in conformity with generally accepted accounting principles on a basis consistent with that of the preceding year. The examination must be conducted in accordance with generally accepted auditing standards, and must involve such tests of the books and records of the system as are considered necessary by the accountant.

(b) The accountant shall also offer an opinion as to whether the separate schedules specified in section 14(c)(1)-(4) and the annual report required by section 11(a)(4) present fairly and in all material respects the information contained in the separate schedules and annual report when considered in conjunction with the financial statements taken as a whole. In offering this opinion, the accountant may rely on the correctness of any actuarial matter to which a qualified actuary has expressed an opinion, if the accountant so states the reliance.

SECTION 16. THE ACTUARIAL STATEMENT FOR DEFINED BENEFIT PLANS.

(a) The actuarial statement required for defined benefit plans must contain the information required by this section for the retirement system or, if section 13(b) applies, for each program and appropriate group of programs.

(b) The trustee shall engage a qualified actuary who shall prepare the actuarial statement. The statement must include:

(1) the dates of the system year and the date of the most recent actuarial valuation;

(2) the total amount of the contributions made by participants and the total amount of all other contributions, including employer contributions, received for the system year and for each of the preceding system years for which the information was not previously reported;

(3) the number of participants, whether or not retired, and beneficiaries receiving benefits covered on the last day of the system year;

(4) the following information on the date of the most recent actuarial valuation and, if available and sufficiently comparable so as not to be misleading, for at least the two preceding actuarial valuations:

(i) the aggregate annual compensation of participants;

(ii) the actuarial value of system assets;

(iii) the actuarial accrued liability;

(iv) the difference between the actuarial value of system assets and actuarial accrued liability;

(v) the actuarial accrued liability expressed as a percentage of the actuarial value of system assets;

(vi) the difference between the actuarial value of system assets and actuarial accrued liability expressed as a percentage of the aggregate annual compensation of participants; and

(vii) the actuarial methods and assumptions used in determining the information described in this paragraph, and other factors that significantly affect the information described in the paragraph; and

(5) such other information as may be necessary to disclose the actuarial position fully and fairly.

SECTION 17. OPINION ON THE ACTUARIAL STATEMENT FOR DEFINED BENEFIT PLANS.

(a) The qualified actuary shall issue an opinion on the actuarial statement:

(1) that to the best of the actuary's knowledge the statement is complete and accurate; and

(2) that each assumption and technique used in preparing the statement is reasonable, taking into account the experience of the retirement system, program, or group of programs and reasonable expectations, and that the assumptions and techniques in the aggregate are reasonable, taking into account the experience of the system, program or group of programs and reasonable expectations.

(b) In offering an opinion, the actuary may rely on the correctness of any accounting matter as to which any qualified public accountant has expressed an opinion, if the actuary so states the reliance.

(c) An actuarial valuation of the retirement system or, if section 13(b) applies, of each program and appropriate group of programs must be made at least once every three years. More frequent actuarial valuations must be made if the actuary determines that more frequent valuation is necessary to support the actuary's opinion.

SECTION 18. GUARANTEED BENEFITS.

(a) If some or all of the benefits under a retirement program are purchased from and guaranteed by an insurance company, insurance service, or other similar organization, the comprehensive annual report must contain a statement from the company, service, or organization covering the system year and enumerating with respect to the program:

(1) the premium rate or subscription charge;

(2) the total premium or subscription charges paid to the company, service, or organization;

(3) the approximate number of persons covered by each class of benefits;

(4) the total claims paid by the company, service, or organization;

(5) dividends or retroactive rate adjustments, commissions, and administrative service or other fees or other specific acquisition costs paid by the company, service, or organization;

(6) any amounts held to provide benefits after retirement;

(7) the remainder of premiums or subscription charges; and

(8) the names and business addresses of brokers, agents, or other persons to whom commissions or fees were paid, the amount paid to each, and for what purpose.

(b) If a company, service, or organization does not maintain separate experience records covering the specific groups it serves, the comprehensive annual report must contain in lieu of the information required by subsection (a):

(1) a statement as to the basis of its premium rate or subscription charge;

(2) the total amount of premiums or subscription charges received from the system;

(3) a copy of the most recent financial report of the company, service, or organization; and

(4) if the company, service, or organization incurs specific costs in connection with the acquisition or retention of the system, a detailed statement of the costs.

SECTION 19. ENFORCEMENT.

(a) A suit may be brought [in an appropriate court] [after exhausting all administrative remedies, except that a court may relieve a petitioner of the requirement to exhaust any or all administrative remedies to the extent that the administrative remedies are inadequate or requiring their exhaustion would result in irreparable harm disproportionate to the public benefit derived from requiring exhaustion]:

(1) by an employer, participant, beneficiary, or fiduciary for appropriate relief under section 9;

requiring their exhaustion would

December 19, 1995

Page - 33 - (2) by an employer, participant, beneficiary, or fiduciary to enjoin any act, practice, or omission which violates this [Act] or to obtain other appropriate equitable relief to redress the violation or to enforce this [Act]; or

(3) by [the Agency] to enjoin any violation of section 11(e).

(b) A suit under this section must be filed within one year of the challenged act, practice, or omission under subsection (a)(1) or (a)(2), but the time is extended:

(1) during the pendency of the petitioner's timely attempts to exhaust available administrative remedies, if the attempts are not clearly frivolous or repetitious; and

(2) during any period that the petitioner did not know and was under no duty to discover, or did not know and was under a duty to discover but could not reasonably have discovered, that the challenged act or practice occurred.

(c) A suit under this section must be filed during a period of noncompliance under subsection (a)(3).

(d) A retirement system may sue or be sued under this [Act]. [Service of summons, subpoena, or other legal process of a court upon the administrator in his or her official capacity constitutes service upon the system.] Any money judgment against a system under this [Act] is enforceable only against the system and is not enforceable against any other person unless liability against the person is established in his or her individual capacity under this [Act].

(e) In any action under this section by a participant, beneficiary, or fiduciary, the court may allow a reasonable attorney's fee and costs of action to either party.

SECTION 20. ANTI-ALIENATION. Except where another statute of this State specifically permits benefits of a retirement program to be assigned or alienated, benefits may not be assigned or alienated.

[SECTION 21. PURCHASE-OF-SERVICE CREDIT.

(a) In this section:

(1) "Any pension benefit based on a year of employment" means a retirement, death, or permanent disability benefit that the participant, or a beneficiary, is or will be entitled to receive based on the participant's service during the year or on employer or employee contributions made for the participant's benefit during the year, but the term does not include any benefits:

(i) from arrangements or payments made pursuant to the federal Social Security Act (42 U.S.C. 401 et seq.);

(ii) from an individual retirement account or individual retirement annuity within the meaning of section 408 of the Code, however, an amount that derives from employer or employee contributions made during a year that are rolled over from a qualified plan into an individual retirement account or individual retirement annuity constitutes a "pension benefit based on a year of employment," unless the total amount deriving from employer or employee contributions made during the year is used to purchase service credit pursuant to subsection (f)(2);

(iii) deriving from employee or employer contributions that have been distributed to the participant, or a beneficiary, and subject to federal income taxation; or

(iv) deriving from employee or employer contributions that have been rolled over pursuant to subsection (f)(1) to purchase years of service credit under this section.

(2) "Number of years of service" means the number of years of service calculated to the nearest one-hundredth of a year.

(3) "Year of full-time employment" means a calendar or academic year during which the participant has completed 1,000 or more hours of service. For academic years, the year of full-time employment is deemed earned during the calendar year in which the last day of the academic year falls. No more than one year of full-time employment may be claimed for any given calendar year.

(b) Each retirement program must permit each participant in a defined benefit plan to purchase years of service credit, subject to the conditions described in subsection (c).

(c) Years of service credit may be purchased for any period of employment with any prior employer, provided that:

(1) years of service credit may be purchased only in full-year increments;

(2) one year of service credit may be purchased for each year of full-time employment with an employer;

(3) service credit may not be purchased for any year of employment with an employer if the participant receives any pension benefit based on that year of employment, other than a benefit resulting from the purchase of service credit under this section;

(4) a participant may not revoke a decision to purchase service credit; and

(5) participants applying to purchase years of service credit must provide certification from prior employers as to the dates of employment, hours of service worked each calendar or academic year, and pension benefits resulting from the employment and must agree to a payment method and schedule that complies with the requirements of subsections (e)-(g).

(d) Purchased years of service credit must be used to determine whether benefits are nonforfeitable, to determine the amount of retirement, death, or permanent disability benefits, and for all other purposes under the retirement program[, but purchased years of service credit may not be used to establish eligibility for retiree health benefits].

(e) For each year of service credit purchased under this section, a participant shall pay an amount equal to the present value of the increased benefits that will result from the year of service credit purchased. Each retirement program must establish a method to determine the present value of the increased benefits, based on reasonable actuarial factors. To the extent a participant does not pay the full amount within 180 days of making the decision to purchase service credit, a reasonable rate of interest must be added to the amount due, commencing 180 days after the participant makes the decision and continuing until full payment is made.

(f) A participant may pay for years of service credit purchased in any one or any combination of the following ways:

(1) By the transfer of any portion of an eligible rollover distribution from a qualified trust, but only to the extent the transfer meets the requirements of Section 402(c) of the Code to be excluded from the gross income of the participant for the taxable year in which the distribution is paid;

(2) By the transfer of any portion of an individual retirement account or individual retirement annuity, but only to the extent the transfer is a rollover contribution that meets the requirements of Section 408 of the Code to be excluded from the gross income of the participant for the taxable year in which the amount is paid or distributed out of the individual retirement account or individual retirement annuity to the participant;

(3) By a lump-sum payment; or

(4) By installment payments over a period of time not to exceed 10 years.

(g) Payment under subsection (f) may not be made if it would result in payments by the participant that would exceed the annual ceiling for tax-deferred contributions under section 415 of the Code. To the extent any payment would result in payments by the participant that would exceed the annual ceiling, the payment shall be deferred until the next year in which payments can be made without exceeding the annual ceiling and appropriate adjustments must be made to the amount of interest added to the amount due under subsection (e). If a participant is unable to complete payments within the 10-year period of subsection (f)(4) because of the limitations of this subsection, or for any other reason, subsection (h) applies.

(h) If a participant is unable to complete payments for years of service purchased for any reason, the program shall:

(1) determine the amount of money the participant paid for the purchase of service credit and when the payments were made;

(2) discount the amount determined under paragraph (1) to its value as of the date 180 days after the participant made the decision to purchase service credit, based on the actuarial and interest assumptions used at the time the participant made the decision to purchase service credit; and

(3) credit the participant for a number of years of service equal to the number the participant would have been able to purchase on the date the participant made the decision to purchase service credit for the amount determined under paragraph (2), based on the actuarial and interest assumptions used at the time the participant made the decision to purchase service credit.

(i) Retirement programs shall adopt rules and regulations to implement the provisions of this section.]

SECTION 22. UNIFORMITY OF APPLICATION AND CONSTRUCTION. This [Act] shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this [Act] among states enacting it.

SECTION 23. SHORT TITLE. This [Act] may be cited as the "[Name of Enacting State] [Uniform or Model] Management of Public Employee Retirement Funds Act.

SECTION 24. SEVERABILITY. If any provision of this [Act] or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this [Act] which can be given effect without the invalid provision or application, and to this end the provisions of this [Act] are severable.

SECTION 25. EFFECTIVE DATE. This [Act] takes effect . . .

SECTION 26. REPEALS. The following acts and parts of acts are repealed:

(1) . . .

(2) . . .

(3) . . .

SECTION 27. SAVINGS AND TRANSITIONAL PROVISIONS.