HB5 By Representative Hill (M) RFD State Government Rd 1 02-FEB-16

SYNOPSIS: Under existing law, the State Personnel Board has established a tax deferred compensation plan for employees of the state or a municipality, county, or other public entity electing to participate in the plan.

This bill would authorize entities participating in the plan to enroll employees in the plan upon employment with an option to opt out of the plan within 90 days after enrollment.

A BILL TO BE ENTITLED AN ACT

To amend Section 36-26-14, Code of Alabama 1975, as amended by Act 2015-83, providing for the establishment of a tax deferred compensation plan by the State Personnel Board, to authorize entities participating in the plan to enroll employees in the plan with provisions for the employee to opt out under certain conditions.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:Section 1. Section 36-26-14, Code of Alabama 1975, as amended by Act 2015-83, is amended to read as follows:

§36-26-14.

"(a) The personnel board may adopt, establish, and maintain a deferred compensation plan or plans, except under Internal Revenue Code Section 403 (b), for the employees of the State of Alabama or any city, town, county, or public entity or corporation organized pursuant to the laws of this state. Notwithstanding the foregoing, prior to the employees of a county or political subdivision of the county participating in a plan, the employing county or political subdivision of the county shall approve participation in the plan. The personnel board may include in any such plan any provision that does not cause the plan to fail to qualify for its tax-favored treatment under the United States Internal Revenue Code, including, but not limited to, participant loans, unforeseeable emergency or hardship distributions, Roth deferrals, rollovers, transfers to purchase service credit, and distributions to purchase a retired public safety officer's health insurance.

"(b) The State of Alabama Personnel Board may adopt and arrange for consolidated billing and efficient investment, trustee, administrative, and professional services in order that any such plans adopted shall operate without cost to or contribution from the State of Alabama except for incidental expenses associated with administering any such plan, the payroll salary-reductions and the remittance thereof to the trustee or custodian of the plan or plans.

"(c) Subject to subsection (h), Alabama state employees, or the employees of any city, town, county, or public entity or corporation organized pursuant to the laws of this state may participate in these plans on a voluntary basis by authorizing in writing to their employer a reduction in their cash remuneration to be placed in the plan or plans.

"(d) The Finance Director, Comptroller, or other appropriate official is hereby authorized and directed to initiate payroll deductions for the plans as directed by each employee.

"(e) Participants who are receiving monthly benefits from the Employees' Retirement System of Alabama, the Judicial Retirement Fund of Alabama, the Teachers' Retirement System of Alabama, or any other public retirement plan may opt to have the cost of their retiree health insurance deducted from their deferred compensation distribution in accordance with the guidelines of the United States Internal Revenue Service.

"(f) It is expressly provided that any benefits under the provisions of this section shall be in addition to any other benefits provided by law for any employees of the State of Alabama, and this section is specifically made supplemental to and shall be construed in pari materia with the provisions of the employees' retirement law of Alabama.

"(g) 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.

"(h)(1) After the effective date of the act adding this subsection, the board, in the case of state employees, or the employing entity for other employees, may require each person who is employed or returns to employment after a break in service who is eligible to participate in an established plan provided for in subsection (a) to be automatically enrolled in the plan as provided in this subsection.

"(2) An employee enrolled in the plan may opt out of the plan and withdraw without any penalty his or her contribution within 90 days after the date of the employee's first contribution to the plan.

"(3) An employee enrolled in the plan pursuant to this subsection shall contribute one percent of the employee's pre-tax includible compensation to the employee's account in the same manner as otherwise provided for the operation of the plan. An employee automatically enrolled in the plan pursuant to this subsection may change the employee's contribution as otherwise provided for by the plan.

"(4) During the 90-day permissible withdrawal period, the plan shall invest all contributions made by the employee in an appropriate investment option with limited exposure to market volatilities as determined by the plan or as otherwise determined by the employee. Thereafter, an employee enrolled in the plan may change his or her investment options and invest funds in his or her account in the same manner as other participants in the plan.

"(5) The board, in the case of a state employee, or the employing entity for other employees, shall provide notice in writing to an employee automatically enrolled in the plan. The notice shall include information on the right of the employee to opt out of the plan during the 90-day opt out period and information on investment options under the plan. Notwithstanding the foregoing, the failure to provide notice pursuant to this subdivision shall create an additional obligation or liability on the part of the state, the board, or the plan administrators."

Section 2. This act shall become effective on the first day of the third month following its passage and approval by the Governor, or its otherwise becoming law.

Taxation

State Personnel Board

Code Amended