Reference Title: optional retirement program; community colleges

AN ACT
AMENDING SECTIONS 15-1444 AND 15-1451, ARIZONA REVISED STATUTES; AMENDING SECTION 38-782, ARIZONA REVISED STATUTES, AS AMENDED BY LAWS 1997, CHAPTER 291, SECTION 4; AMENDING SECTION 43-1022, ARIZONA REVISED STATUTES; RELATING TO OPTIONAL RETIREMENT PROGRAMS.

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 15-1444, Arizona Revised Statutes, is amended to read:

15-1444 . Powers and duties

A. Except as otherwise provided, the district board shall:

1. Maintain each community college for a period of not less than eight months in each year and, if the funds of the district are sufficient, maintain each community college for a longer period.

2. Enforce the courses of study prescribed by the state board.

3. Visit each community college and examine carefully into its management, conditions and needs.

4. Exclude from each community college all books, publications or papers of a sectarian, partisan or denominational character intended for use as textbooks.

5. Appoint and employ a president or presidents, vice-presidents, deans, professors, instructors, lecturers, fellows and such other officers and employees it deems necessary.

6. Determine the salaries of persons it appoints and employs.

7. Remove any officer or employee if in its judgment the interests of education in this state require the removal.

8. Award degrees, certificates and diplomas upon the completion of courses and curriculum as it deems appropriate.

9. Appoint, if it deems necessary, police officers who shall have the authority and power of peace officers. The police officers who have received a certificate from the Arizona law enforcement officer advisory council are eligible for membership in and benefits under either title 38, chapter 5, article 2 or the public safety personnel retirement system under title 38, chapter 5, article 4.

10. Receive, hold, make and take leases of and sell personal property for the benefit of the community colleges under its jurisdiction.

11. Obtain insurance against loss, to the extent it is determined necessary on community college buildings of the district, whether financed in whole or in part by state monies. The local district shall have an insurable interest in the buildings.

B. The district board may:

1. Administer trusts declared or created for the district and receive by gift or devise and hold in trust or otherwise property wheresoever located, and if not otherwise provided, dispose of the property for the benefit of the district, if, with respect to real property, the state board has consented to the disposition of the real property.

2. Lease real property, as lessor or as lessee, if authorized by the state board as provided in section 15-1424. If a district is the lessee, the lease may contain an option to purchase the property.

3. Contract, subject to the rules and limitations prescribed by the state board as provided in section 15-1424. THE DISTRICT BOARD MAY ADOPT SUCH REGULATIONS, POLICIES, RULES OR MEASURES AS ARE DEEMED NECESSARY AND MAY DELEGATE IN WRITING TO ITS COMMITTEES, TO THE PRESIDENT OR CHANCELLOR OF ITS DISTRICT, OR THEIR DESIGNEES, OR TO OTHER ENTITIES UNDER ITS CONTROL, ANY PART OF ITS AUTHORITY TO CONTRACT UNDER THIS PARAGRAPH. ANY DELEGATION OF AUTHORITY UNDER THIS PARAGRAPH MAY BE RESCINDED BY THE DISTRICT BOARD AT ANY TIME IN WHOLE OR IN PART.

4. Construct, remodel and repair buildings subject to the rules prescribed by the state board as provided in section 15-1424.

5. Provide a plan or plans for employee benefits WHICH MAY INCLUDE OPTIONAL RETIREMENT PROGRAMS PURSUANT TO SECTION 15-1451, SUBSECTION A, which allow for participation in a cafeteria plan that meets the requirements of the United States internal revenue code of 1986.

C. From and after December 31, 1988, in a district whose boundaries encompass a vehicle emissions control area as defined in section 49-541 the district board shall require all out of county and out of state students to sign an affidavit at the time of course registration that the student's vehicle meets the requirements of section 49-542. From and after December 31, 1988, the district board on property under its jurisdiction within a vehicle emissions control area shall prohibit the parking of those vehicles which fail to comply with section 49-542.

Sec. 2. Section 15-1451, Arizona Revised Statutes, is amended to read:

15-1451 . Optional retirement plans

A. Notwithstanding section 38-729, subsection I, AND PURSUANT TO SECTION 15-1444, SUBSECTION B, PARAGRAPH 5, a community college district board may establish an optional retirement program under which contracts providing retirement and death benefits may be purchased for employees of the institutions under its jurisdiction as designated by the community college district board.

B. An optional retirement program established pursuant to this section shall:

1. Be designed to be a qualified governmental plan under section 401(a) of the internal revenue code.

2. Comply with all requirements of the internal revenue code applicable to governmental plans.

3. Be a qualified plan under section 401(a) of the internal revenue code.

4. Apply for and maintain a current letter of determination issued by the United States internal revenue service.

5. Be a qualified pick-up plan as defined by section 414(h)(2) of the internal revenue code as confirmed by a private letter ruling issued by the United States internal revenue service.

6. Provide benefits through annuity contracts that are fixed or variable in nature or that are a combination of fixed and variable.

7. Have at all times at least fifty active participants.

C. Eligible employees may elect to participate in an optional retirement plan established by the community college district board. The eligible employee shall make the election in writing and file the election with the Arizona state retirement system and the disbursing officer of the employing institution. The eligible employee shall make the election within ninety days of the employee's effective date of employment or, if the employee is a member of the Arizona state retirement system on the date the optional retirement program becomes effective, within ninety days of the effective date of the optional retirement program. If an employee who is a member of the Arizona state retirement system elects to participate in an optional retirement program within ninety days of the employee's effective date of employment or the effective date of the optional retirement program, the Arizona state retirement system shall transfer the employee's contributions to the Arizona state retirement system and interest as determined by the board of the Arizona state retirement system to the optional retirement program within the later of ninety days after the election or ninety days after receipt by the optional retirement program of a favorable letter of determination issued by the United States internal revenue service. If an eligible employee fails to make an election as provided in this subsection, the employee is deemed to have elected to participate in the Arizona state retirement system. The election to participate in an optional retirement program is irrevocable and constitutes a waiver of all benefits provided by the Arizona state retirement system. All eligible employees who elect to participate in an optional retirement program shall remain participants in the optional retirement program during the continuance of employment with the community college district.

D. The community college district board shall make contributions from public monies appropriated or any other monies available for this purpose on behalf of each participant in the optional retirement program in an amount equal to the employer contribution prescribed in title 38, chapter 5, article 2.

E. Subject to subsection G of this section, each community college district board that establishes an optional retirement program shall establish program provisions including:

1. Categories of employees that are eligible to elect to participate in the optional retirement program.

2. The employee contribution rate. This rate may be greater than the employee contribution rate prescribed in title 38, chapter 5, article 2.

3. A vesting period for employer contributions, if any. All employee contributions that are picked up by the employer are fully vested at all times.

4. Restrictions on benefits, except that the optional retirement program shall not allow a participant to withdraw employer contributions except as retirement income payable for life or to provide for loans on retirement income.

F. A community college district board may elect to provide health or long-term disability coverage to optional retirement program participants under separate benefit plans. The community college district board may allocate a portion of its employer contribution that would otherwise be made to the optional retirement program under subsection D of this section to the separate benefit plans to provide health or long-term disability coverage.

G. Community college district boards that establish an optional retirement program under this section shall MAY enter into intergovernmental agreements appointing a single administrator or designating a single community college district board to administer the optional retirement program. A COMMUNITY COLLEGE DISTRICT BOARD MAY SATISFY THE REQUIREMENTS OF THIS SECTION BY ENTERING INTO AN INTERGOVERNMENTAL AGREEMENT WITH ANOTHER COMMUNITY COLLEGE DISTRICT BOARD TO PARTICIPATE IN THAT COMMUNITY COLLEGE DISTRICT'S OPTIONAL RETIREMENT PROGRAM. The administration shall include, without limitation, the design and implementation of the plan document establishing the optional retirement program, compliance with the qualification requirements prescribed in subsection B of this section and such other duties that are not inconsistent with this section as may be delegated to the administrator pursuant to the intergovernmental agreements entered into among the community college district boards.

H. Although designated as employee contributions, all employee contributions made to an optional retirement program shall be picked up and paid by the community college district in lieu of contributions by the employee. The contributions picked up by a community college district may be made through a reduction in the employees' salary or an offset against future salary increases, or a combination of both. The employees participating in the optional retirement program do not have the option of choosing to receive the contributed amounts directly instead of the community college district paying the amounts to the optional retirement program. It is intended that all employee contributions that are picked up by the community college district as provided in this subsection shall be treated as employer contributions under section 414(h) of the internal revenue code and shall be excluded from the employees' gross income for federal and state income tax purposes and are includable in the gross income of the employees or their beneficiaries only in the taxable year in which they are distributed.

I. A community college district board shall not be liable to any employee, retiree or other person for any reason relating to the community college district board's provision of or failure to provide for an optional retirement program or health or long-term disability coverage.

Sec. 3. Section 38-782, Arizona Revised Statutes, as amended by Laws 1997, chapter 291, section 4, is amended to read:

38-782 . Group health and accident coverage for retired public employees and elected officials and their dependents

A. The board shall establish group health and accident coverage for eligible retired and disabled members and their dependents. Eligible retired and disabled members are those members who are receiving retirement benefits from ASRS or long-term disability benefits pursuant to section 38-651.03 or article 2.1 of this chapter and who are not eligible to obtain health and accident insurance through their former employer. If an insured retired or disabled member dies before the insured member's dependent beneficiary or an insured surviving dependent, the dependent beneficiary or insured surviving dependent is entitled to coverage at group rates if the dependent beneficiary or surviving dependent elects to continue in the coverage within six months of the insured member's death and the dependent beneficiary or surviving dependent agrees to pay the cost of the premium for group health and accident insurance. On notification of the insured member's death, the board shall immediately notify a dependent beneficiary or an insured surviving dependent of the provisions of this section.

B. Retired members of the public safety personnel retirement system, the elected officials' retirement plan, the corrections officer retirement plan or the optional retirement programs authorized pursuant to section SECTIONS 15-1451 AND 15-1628 and their dependents who are receiving benefits from the public safety personnel retirement system, the elected officials' retirement plan, the corrections officer retirement plan or the optional retirement programs authorized pursuant to section SECTIONS 15-1451 AND 15-1628 and who are not covered by section 38-651.01 may participate in group health and accident coverage provided pursuant to this section. On the death of an insured member of the public safety personnel retirement system, the elected officials' retirement plan, the corrections officer retirement plan or the optional retirement programs authorized pursuant to section SECTIONS 15-1451 AND 15-1628, the insured surviving dependent is entitled to coverage at group rates. Except as provided in subsection H of this section, the surviving dependent shall be charged amounts that are sufficient to pay for the premium and administrative expense of providing the coverage.

C. The board may enter into agreements with retired and disabled members of ASRS who elect to obtain the coverage provided pursuant to subsection A of this section. Those agreements may include provision for the deduction from the retirement benefits of the members who elect to obtain the coverage of amounts sufficient to pay for the premium not covered under retirement benefits and the administrative expense of providing the coverage.

D. The fund manager of the public safety personnel retirement system may enter into agreements with retired members of the public safety personnel retirement system, the elected officials' retirement plan, the corrections officer retirement plan and their dependents who elect to obtain the coverage provided pursuant to this section. Those agreements may include provisions for the deduction from the retirement benefits of the members who elect to obtain the coverage of amounts sufficient to pay for the premium not covered under their retirement benefits and the administrative expense of providing the coverage.

E. The board may enter into agreements with retired members of the optional retirement programs authorized pursuant to section SECTIONS 15-1451 AND 15-1628 and their dependents who elect to obtain the coverage provided pursuant to this section. Those agreements may include provisions for the payment of amounts sufficient to pay for the premium and administrative expense of providing the coverage.

F. If an insured member receiving long-term disability benefits pursuant to article 2.1 of this chapter becomes ineligible for the long-term disability benefits, the member and the covered dependents of the member may continue to participate in the group health and accident coverage provided pursuant to this section subject to the following conditions:

1. Participation in the coverage is limited to twelve months from the date the member ceases eligibility for benefits under article 2.1 of this chapter or the member commences employment, whichever occurs first.

2. The member shall pay the full premium cost of the coverage selected, and the member is not eligible for benefits pursuant to section 38-783.

3. If a member who participates in the coverage dies during the twelve month period provided by this subsection, covered dependents of the member are not eligible to continue coverage after the death of the member.

G. Retired or disabled members who are not eligible for medicare, who live in this state, who enroll in a qualifying health maintenance organization under this section and who reside outside the area of a qualifying health maintenance organization shall be offered the option of enrolling with a qualified health maintenance organization offered through their provider under the same premiums as if they lived within the area boundaries of the qualified health maintenance organization provided that:

1. All medical services are rendered and received at an office designated by the qualifying health maintenance organization or at a facility referred by the health maintenance organization.

2. All nonemergency or nonurgent travel, ambulatory and other expenses from the residence area of the member to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization are the responsibility of and at the expense of the member.

3. All emergency or urgent travel, ambulatory and other expenses from the residence area of the member to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization shall be paid pursuant to any agreement between the health maintenance organization and the member living outside the area of the qualifying health maintenance organization.

H. Public monies shall not be spent to pay all or any part of the insurance premium pursuant to this section except for monies authorized to be paid for any insured from the retirement plan from which the insured is receiving benefits or as provided in section 38-615.

Sec. 4. Section 43-1022, Arizona Revised Statutes, is amended to read:

43-1022 . Subtractions from Arizona gross income

In computing Arizona adjusted gross income, the following amounts shall be subtracted from Arizona gross income:

1. The amount of exemptions allowed by section 43-1023.

2. Benefits, annuities and pensions in an amount totalling not more than two thousand five hundred dollars received from one or more of the following:

(a) The United States government service retirement and disability fund, retired or retainer pay of the uniformed services of the United States, the United States foreign service retirement and disability system and any other retirement system or plan established by federal law.

(b) The state retirement system, the state retirement plan, the corrections officer retirement plan, the public safety personnel retirement system, the elected officials' retirement plan, an optional retirement program established by the Arizona board of regents under section 15-1628 , AN OPTIONAL RETIREMENT PROGRAM ESTABLISHED BY A COMMUNITY COLLEGE DISTRICT BOARD UNDER SECTION 15-1451, or a retirement plan established for employees of a county, city or town in this state.

3. A beneficiary's share of trust or estate income recognized pursuant to the internal revenue code.

4. The amount of any distributions from an individual retirement account as provided for in section 408 of the internal revenue code or from a qualified retirement plan of a self-employed individual as provided for in section 401 of the internal revenue code to the extent that total adjustments made pursuant to this paragraph in all tax years do not exceed the total of all contributions made by the taxpayer to such plans prior to December 31, 1975, which were included in computing Arizona taxable income.

5. The amount of income on an installment receivable which is recognized pursuant to the internal revenue code and which has already been recognized on the death of the taxpayer for purposes of this title for tax years ending before January 1, 1990.

6. Interest income received on obligations of the United States, less any interest on indebtedness, or other related expenses, and deducted in arriving at Arizona gross income, which were incurred or continued to purchase or carry such obligations.

7. The amount of any income tax refunds which were received from states other than Arizona and which were included as income in computing federal adjusted gross income.

8. Annuity income included in federal adjusted gross income pursuant to section 72 of the internal revenue code if the first payment with respect to such annuity was received prior to December 31, 1978.

9. The excess of a partner's share of income required to be included under section 702(a)(8) of the internal revenue code over the income required to be included under chapter 14, article 2 of this title.

10. The excess of a partner's share of partnership losses determined pursuant to chapter 14, article 2 of this title over the losses allowable under section 702(a)(8) of the internal revenue code.

11. The amount by which the adjusted basis of property described in this paragraph and computed pursuant to this title and the income tax act of 1954, as amended, exceeds the adjusted basis of such property computed pursuant to the internal revenue code. This paragraph shall apply to all property which is held for the production of income and which is sold or otherwise disposed of during the taxable year other than depreciable property used in a trade or business.

12. The amount allowed by section 43-1024 for amortization, by a qualified defense contractor certified by the department of commerce under section 41-1508, of a capital investment for private commercial activities.

13. The amount of gain included in federal adjusted gross income on the sale or other disposition of a capital investment that a qualified defense contractor has elected to amortize pursuant to section 43-1024.

14. The amount allowed by section 43-1025 for contributions during the taxable year of agricultural crops to charitable organizations.

15. The portion of any wages or salaries paid or incurred by the taxpayer for the taxable year that is equal to the amount of the federal work opportunity credit, the empowerment zone employment credit, the credit for employer paid social security taxes on employee cash tips and the Indian employment credit that the taxpayer received under sections 45A, 45B, 51(a) and 1396 of the internal revenue code.

16. The amount of prizes or winnings less than five thousand dollars in a single taxable year from any of the state lotteries established and operated pursuant to title 5, chapter 5, article 1, except that all such winnings before March 22, 1983, including periodic distributions from such winnings made after March 22, 1983, may be subtracted.

17. The amount of exploration expenses THAT IS determined pursuant to section 617 of the internal revenue code which have , THAT HAS been deferred in a taxable year ending before January 1, 1990 and for which a subtraction has not previously been made. The subtraction shall be made on a ratable basis as the units of produced ores or minerals discovered or explored as a result of this exploration are sold.

18. The amount included in federal adjusted gross income pursuant to section 86 of the internal revenue code, relating to taxation of social security and railroad retirement benefits.

19. To the extent not already excluded from Arizona gross income under section 112 of the internal revenue code, compensation received for active service as a member of the armed forces of the United States for any month during any part of which the member served in a combat zone as determined under section 112 of the internal revenue code or in an area given the same treatment as a combat zone for purposes of section 112 of the internal revenue code.

20. The amount of unreimbursed medical and hospital costs, adoption counseling, legal and agency fees and other nonrecurring costs of adoption not to exceed three thousand dollars. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife shall not exceed three thousand dollars. The subtraction under this paragraph may be taken for the costs described in this paragraph that are incurred in prior years, but the subtraction may be taken only in the year during which the final adoption order is granted.

21. The amount authorized by section 43-1026 for the taxable year for purchases of, and equipment relating to, alternative fuel vehicles.

22. The amount authorized by section 43-1027 for the taxable year for purchases of, and nonoptional equipment directly related to the operation of, qualified wood stoves, wood fireplaces or gas fired fireplaces.

23. With respect to a medical savings account established pursuant to section 43-1028:

(a) An eligible individual may subtract:

(i) The amount of contributions made by the individual's employer during the taxable year to the individual's medical savings account pursuant to section 43-1028 to the extent that the employer contributions are included in the individual's federal adjusted gross income.

(ii) The amount deposited by the individual in the account during the taxable year to the extent that the individual's contributions are included in the individual's federal adjusted gross income.

(b) The individual's employer may subtract the amount of contributions made by the employer to a medical savings account established on the individual's behalf to the extent that the contributions are not deductible under the internal revenue code.

24. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 43-1029, subsection F exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code.

25. Any amount of qualified educational expenses THAT IS distributed from a qualified state tuition program determined pursuant to section 529 of the internal revenue code and that is included in income in computing federal adjusted gross income.

APPROVED BY THE GOVERNOR MAY 29, 1998.

FILED IN THE OFFICE OF THE SECRETARY OF STATE JUNE 2, 1998.