HB466

ENGROSSED

A BILL TO BE ENTITLED AN ACT

Relating to individual retirement accounts administered by the Retirement Systems of Alabama; to amend Section 36-27A-5, Code of Alabama 1975, relating to contributions to individual retirement accounts, to require public employees first employed by a participating employer of the Teachers’ Retirement System, Employees’ Retirement System, or Judicial Retirement Fund on or after January 1, 2017 to make contributions to such individual retirement accounts through an automatic enrollment process, and to provide for opt-out provisions or enrollment in alternative retirement accounts offered by employers under certain conditions.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:Section 1. Section 36-27A-5, Code of Alabama 1975, is hereby amended to read as follows:

§36-27A-5.

"(a) The PEIRAF shall be available to all public employees in the State of Alabama who are members of the Teachers' Retirement System, the Employees' Retirement System or the Judicial Retirement Fund. In addition, any employee of an employer eligible to participate in the Employees' Retirement System pursuant to the provisions of Section 36-27-6, or any public official or employee of the State of Alabama or any political subdivision thereof, shall be eligible to participate under the provisions of this chapter. Participation in this fund shall be on a strictly voluntary basis under such rules and regulations as shall be adopted by the board of control and in accordance with the provisions contained in the Internal Revenue Code as it relates to individual retirement accounts for public employees. Any person who shall become ineligible for participation in the PEIRAF due to the termination of his employment with an eligible employer may leave his contributions on account with the PEIRAF; however, no further contributions may be accepted on his account unless such person shall become reemployed by an eligible employer.

"(b)(1) All public employees in the State of Alabama, except those who participate in the Employees’ Retirement System pursuant to the provisions of Section 36-27-6 and those who participate in the Teachers’ Retirement System as employees of public colleges and universities, who first begin employment with a participating employer of the Teachers’ Retirement System, the Employees’ Retirement System, or the Judicial Retirement Fund on or after January 1, 2017 shall, unless electing otherwise, be automatically enrolled at the time of employment in the PEIRAF under such rules and regulations as shall be adopted by the board of control and in accordance with the provisions contained in the Internal Revenue Code as it relates to individual retirement accounts for public employees. All employers participating in the Employees’ Retirement System pursuant to the provisions of Section 36-27-6 may elect to participate in the automatic enrollment program, except that only those counties participating in the Employees’ Retirement System that have adopted the higher employee contribution rate provided for in Act No. 2011-676 shall be eligible to elect to participate in the automatic enrollment program.

"(2)(i) A public employee enrolled in the fund pursuant to this subsection (b) may elect to opt out of the fund and withdraw any of his or her contributions at any time. Provided however, that the employee may withdraw without any penalty his or her contributions within 90 days after the date of the public employee's first contribution to the fund.

(ii) In addition to enrollment in the PEIRAF, or as an alternative thereto, a public employee may elect at the time of hire or at any time to enroll in any other deferred compensation plan offered by the public employee's employer, including any other deferred compensation plan authorized by the state personnel board, provided that the employer discloses, along with any minimum contribution requirements, whether fees or any other expenses are to be charged or applied to participating employees in the alternate plan offered by the employer and also discloses that employees who participate in the PEIRAF do so at no cost to the participating employee pursuant to the provisions of this Chapter.

(3) The default contribution amount for a public employee automatically enrolled in the PEIRAF pursuant to this subsection shall be one and one-half percent (1.5%) of the public employee's pre-tax includible compensation to the public employee's account in the same manner as otherwise provided for the operation of the fund. At the time of enrollment, a public employee may adjust the public employee's contribution amount, subject to any limitations on contributions established by the board of control or mandated by state or federal law.

"(4) For employers who participate in the automatic enrollment program, the board of control may adopt an auto-escalation program through which the contributions of employees enrolled in the fund would automatically increase as the employee’s salary increases, under such rules and regulations as shall be adopted by the board of control. Such program, if adopted by the board of control, shall be optional for participating employees, and each participating employee may elect to opt out of the auto-escalation program at any time. Any employer participating in the Employees’ Retirement System pursuant to the provisions of Section 36-27-6 that has elected to participate in the automatic enrollment program may also elect to participate in any auto-escalation program adopted by the board of control.

"(5) All other terms of participation in the PEIRAF will be governed by the rules and regulations adopted by the board of control.

"(6) The employer of a public employee shall provide notice in writing to the employee at the time of employment or hire of the employee's automatic enrollment in the PEIRAF, and the right of the employee to opt out of the fund or, if applicable, into a different plan offered by the employer in accordance with this subsection. The notice shall also include information on the right of the public employee to opt out of the PEIRAF and withdraw his or her contributions without penalty during the 90-day opt out period, as well as any other disclosures required under this subsection or Chapter, as applicable.

(7) If the period allowed for a permissible withdrawal under the United States Internal Revenue Code regulations is modified so that it is different from the 90-day opt out period provided for in this subsection (b), then the applicable period for permissible withdrawal under this subsection (b) shall be deemed to be such period allowed for withdrawal of contributions without penalty by the United States Internal Revenue Code.

"(8) Participation in the fund or any other deferred compensation plan pursuant to this subsection shall be in addition to participation in the Retirement Systems of Alabama pursuant to Chapter 18 of Title 12, Chapter 25 of Title 16, and Chapter 27 of Title 36.

Section 2. (a) Other than the PEIRAF fund provided for in Section 36-27A-1, et. seq., any third party administrator or provider of a deferred compensation plan offered by a public employee’s employer shall be selected in accordance with all applicable competitive bid and procurement laws.

(b) Other than the PEIRAF fund provided for in Section 36-27A-1, et. seq., and except as otherwise required under the Internal Revenue Code, each such deferred compensation plan and its trust shall be established and maintained for the exclusive benefit, as defined by law of the plan's participants and their beneficiaries, and all assets of any such plan shall be held for the exclusive benefit of the plan's participants and their beneficiaries. For the purposes and within the meaning of Section 19-3B-102, each such plan is declared to be a trust created by statute and is therefore required to be administered in the manner of an express trust.

(c) Other than the PEIRAF fund provided for in Section 36-27A-1, et. seq., a third party administrator or provider of a plan under this act, or any prospective third party administrator or provider seeking to implement a plan under this act, shall be considered a Principal for the purpose and application of Chapter 25 of Title 36 of the Code of Alabama.