Administrative Rules of the State of Montana

BEFORE THE PUBLIC EMPLOYEES' RETIREMENT BOARD

OF THE STATE OF MONTANA

In the matter of the proposed adoption of NEW RULES I through XIII; the proposed amendment and transfer of ARM 2.43.203 through 2.43.205, 2.43.301 through 2.43.303, 2.43.308 through 2.43.310, 2.43.402 through 2.43.408, 2.43.410, 2.43.418, 2.43.420 through 2.43.424, 2.43.426, 2.43.432, 2.43.433, 2.43.437, 2.43.440, 2.43.451, 2.43.452, 2.43.502 through 2.43.506, 2.43.508 through 2.43.511, 2.43.514, 2.43.515, 2.43.603, 2.43.604, 2.43.607, 2.43.611, 2.43.617, 2.43.801 through 2.43.804, 2.43.905, 2.43.914, 2.43.1002 through 2.43.1004, 2.43.1010 through 2.43.1012, 2.43.1015, 2.43.1017, 2.43.1020, 2.43.1031, 2.43.1032, 2.43.1045, 2.43.1046, 2.43.1101, 2.43.1104, 2.43.1111, 2.43.1112, 2.43.1210 through 2.43.1212, 2.43.1701, 2.43.1703, 2.43.1704, 2.43.1802, 2.43.1803, and 2.43.1810 through 2.43.1812; the proposed repeal of ARM 2.43.409, 2.43.425, 2.43.428 through 2.43.430, 2.43.520, 2.43.605, 2.43.606, 2.43.609, 2.43.610, and 2.43.1030; and the proposed transfer of ARM 2.43.201, 2.43.202, 2.43.304, 2.43.512, 2.43.513, 2.43.901, 2.43.902, 2.43.909 through 2.43.911, 2.43.1001, 2.43.1005, 2.43.1023 through 2.43.1025, 2.43.1040, 2.43.1105, 2.43.1108, 2.43.1110, 2.43.1113, 2.43.1115, 2.43.1118, 2.43.1119, 2.43.1702, 2.43.1705, and 2.43.1801, all pertaining to the operation of the retirement systems and plans administered by the Montana Public Employees' Retirement Board

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NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION, AMENDMENT AND TRANSFER, REPEAL, AND TRANSFER

TO: All Concerned Persons

1. On October 3, 2008, at 10:00 a.m., the Montana Public Employees' Retirement Board will hold a public hearing in the board room at 100 North Park Avenue, Suite 200, Helena, Montana, to consider the proposed adoption, amendment and transfer, repeal, and transfer of the above-stated rules.

2. The Montana 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 12:00 p.m. on September 26, 2008, to advise us of the nature of the accommodation that you need. Please contact Angela Salvitti, Montana Public Employee Retirement Administration; telephone (406) 444-2578; fax (406) 444-5428; TDD (406) 444-1421; or e-mail asalvitti@mt.gov.

3. The rules as proposed to be adopted provide as follows:

NEW RULE I CORRECTION OF DEFINED BENEFIT RETIREMENT SYSTEM REPORTING ERRORS (1) Employers may correct reporting errors affecting defined benefit retirement system members on subsequent pay period reports via a letter of explanation. The explanation must include all salary and service documentation for the reported error and the affected time period.

(2) After MPERA verifies that an error has been made in the contributions paid and the service reported, MPERA shall:

(a) notify the reporting agency of any contributions and interest due;

(b) credit any excess employer and member contributions to the employer on MPERA's payroll records; and

(3) The board may reduce interest due on delinquent contributions if the reporting error was not timely identified by MPERA staff.

(4) Corrections reducing a defined benefit retirement system member's contribution cannot be accepted if the employee has received a refund.

(5) If the service related to the reporting error was initially reported to the wrong retirement system, MPERA shall:

(a) transfer the correct amount of employer and employee contributions from the original retirement system to the correct retirement system;

(b) credit the employer with any excess employer and employee contributions or collect from the employer and pay to the original retirement system any additional employer and employee contributions; and

AUTH: 19-2-403, MCA

IMP: 19-2-506, 19-2-903, MCA

STATEMENT OF REASONABLE NECESSITY: ARM 2.43.404 is proposed to address reporting requirements while New Rule I addresses defined benefit retirement system corrections and New Rule II addresses DCRP corrections. Sections (1), (2), and (4) combine revised versions of ARM 2.43.404(4) and (6) regarding correction of defined benefit retirement system reporting errors with ARM 2.43.409 regarding correction of defined benefit retirement system credited service errors to create one rule that addresses all issues associated with a defined benefit retirement system reporting error. This reorganization will make it easier for employers and MPERA staff to reference corrections of defined benefit retirement system-related reporting errors.

Section 19-2-506(2), MCA gives the board discretion to waive interest penalties associated with employer reporting errors. The board has seen instances when interest would have been reduced had MPERA staff timely recognized the reporting error. Section (3) recognizes these situations and gives the board authority to reduce the associated interest penalty.

Section (5) is necessary to address the correction of reporting errors that implicate more than one system. This situation has become more prevalent now that detention officers are members of SRS rather than PERS.

NEW RULE II CORRECTION OF DEFINED CONTRIBUTION RETIREMENT PLAN REPORTING ERRORS (1) Reporting errors affecting PERS members who elect the PERS defined contribution retirement plan (DCRP) will be corrected as follows:

(a) Corrections increasing a contribution will be credited to the participant's individual account within two working days of receipt of the contributions in good order.

(i) The employer must submit correct contributions for the entire period(s) of improper reporting.

(ii) The corrected contributions cannot be invested on a retroactive basis.

(iii) MPERA shall adjust the member's membership service to the correct amount, if necessary.

(b) Corrections reducing a contribution will decrease the participant's individual account.

(i) The DCRP recordkeeper will recover the incorrect contribution from the participant's individual account and submit a refund to MPERA.

(ii) MPERA shall credit the employer's account with the recovered contribution.

(iii) The employer must correct its payroll records and pay the refund to the DCRP participant.

(iv) MPERA shall adjust the member's membership service, if necessary.

(2) Reporting errors that result in a defined benefit retirement system member improperly electing to participate in the DCRP require the following accounting transactions:

(a) all funds from the ineligible member's DCRP account must be transferred to the member's appropriate defined benefit retirement system trust fund;

(b) the portion of employer contributions allocated to the plan choice rate must be transferred to the DBRP trust fund;

(c) the portion of employer contributions paid into the DCRP long-term disability trust fund must be transferred to the DBRP trust fund; and

(d) the portion of employer contributions paid into the DCRP education fund must be transferred to:

(i) the defined benefit education fund, if a PERS member; or

(ii) the member's appropriate DBRP trust fund, if not a PERS member.

(3) Reporting errors that result in an Optional Retirement Program (ORP) member improperly electing to participate in the DCRP will be corrected by allocating contributions pursuant to 19-21-214, MCA.

(4) Corrections reducing a DCRP participant's contribution cannot be accepted if the participant has received a refund.

(5) After MPERA has documented to its satisfaction that all corrections have been made to the DCRP, MPERA shall then make any necessary corrections to the applicable defined benefit retirement system pursuant to [NEW RULE I].

AUTH: 19-2-403, 19-3-2104, MCA

IMP: 19-2-903, MCA

Subsections (1)(a)(i) through (iii) are proposed to provide specific guidelines with respect to the employer's responsibilities and MPERA's responsibilities when correcting DCRP reporting errors. Sections (2), (3), and (5) are new sections to address how to correct reporting errors that result in an ineligible retirement system member joining the DCRP or ORP. This issue has arisen several times since implementation of the DCRP. Documentation of these approved processes will ensure consistency in application.

NEW RULE III CALCULATION OF HIGHEST AVERAGE COMPENSATION OR FINAL AVERAGE COMPENSATION (1) For "highest average compensation" and "final average compensation" purposes, compensation means the total compensation earned during 36 consecutive calendar months divided by 36.

(a) Lump-sum payments of paid leave, including vacation, personal, sick, or compensatory leave must be used to extend the compensation on the basis of either the regular hourly rate in effect for the employee at the time of termination and on identified future regular payroll reports, or the monthly salary earned at the time of termination.

(b) The lump-sum payment of paid leave, including vacation, personal, sick, or compensatory leave, for members whose monthly compensation varies will be extended by multiplying their hourly rate times 2080 (the assumed number of hours worked in a fiscal year) divided by 12 to determine the monthly wage going forward.

(2) Lump-sum payments for compensatory leave, sick leave, or vacation leave paid without termination of employment will not be considered as compensation for any purpose regardless how the payout is classified, including identifying the payout as a bonus.

AUTH: 19-2-403, MCA

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

STATEMENT OF REASONABLE NECESSITY: This proposed rule will simplify service calculations as analysts will no longer need to add portions of months to reach a total of 36 months of actual service. The proposed rule is consistent with statute and has no negative impact on members. Section (2) addresses issues regarding in-service payouts of excess compensatory or annual leave as bonuses, a practice becoming more common under the state's broadband pay plan. Statute prohibits including in-service payouts of excess leave in compensation for retirement purposes.

New Rule IV RETIREMENT SYSTEM MEMBERSHIP OPTIONS FOR LEGISLATORS (1) A legislator has three options with respect to retirement system membership.

(a) A legislator may elect membership in PERS.

(b) A legislator who is a member, but not a retiree, of JRS, GWPORS, HPORS, SRS, MPORS, or FURS due to their nonlegislative employment may elect to continue participation in their current public retirement system rather than electing PERS.

(2) A legislator's application to join PERS, to join their existing public retirement system, or to decline retirement system membership must be filed with MPERA within 180 days of the first day of the legislator's term of office.

(3) A retired PERS member who is elected to a state or local government public office covered by PERS may elect to become an active member of PERS or remain a retired member, with no limitation on the number of hours worked in the elected position.

(4) A legislator who becomes a member of PERS must pay regular contributions on all compensation for service in office. PERS DBRP members may pay contributions for their entire term of office.

(a) Contributions must be paid through payroll deduction during a legislative session.

(b) Contributions for DBRP members may be paid directly to MPERA when the Legislature is not in session.

(c) The total contribution required for each term will be based on the statutory salary prescribed in 5-2-301, MCA, for that term, less any previous contributions.

(d) All contributions must be paid to MPERA no later than the last day of the legislator's final term in that office.

(e) Service credit and membership service will be granted pursuant to 19-3-521, MCA.

(5) A legislator who elects to continue participation in their nonlegislative retirement system pursuant to (1)(b):

(a) must pay contributions into their nonlegislative retirement system as provided for in 5-2-304, MCA; and

(b) may not retire from that system until their legislative service terminates.

(6) A senator who is subsequently elected to serve as a representative, or a representative who is subsequently elected to serve as a senator, is considered to have started a new term of office and has a new 180-day election period under (1) if they previously declined participation in any public service retirement system.

(7) A senator or representative whose district changes as a result of redistricting is not considered to have started a new term of office and does not have a new 180-day election period.

(8) A PERS DBRP member who elects to purchase into PERS previous service as a legislator must comply with 19-3-505, MCA, except the cost will not include interest for any contributions due on service prior to July 1, 1993.

AUTH: 19-2-403, MCA

IMP: 5-2-304, 19-2-715, 19-2-718, MCA

STATEMENT OF REASONABLE NECESSITY: Recently passed differences between retirement options available to legislators and retirement options available to other elected officials require two separate rules for easier understanding. This proposed new rule includes requirements from current ARM 2.43.418 that pertain to legislators and new requirements resulting from HB 765 (2007). HB 765 addresses a legislator's inability to retire from other public employment if the legislator elects to continue, while a legislator, to participate in the retirement system that covers the other public employment. The board believes the adoption of this rule will assist legislators in better understanding their retirement system options. Section (8) provides a reminder that prior to July 1, 1993, statute did not require that interest be charged on purchases of legislative service.

NEW RULE V PROCESS FOR PURCHASING SERVICE (1) Members of MPERA-administered retirement systems interested in purchasing any service credit permitted in PERS, JRS, HPORS, SRS, GWPORS, MPORS, or FURS must submit a written request to MPERA providing the following member information:

(a) full name, including previous surnames, if any;

(b) social security number;

(d) current retirement system;

(e) name of employer for whom service was performed;

(f) type of service to be purchased, if known;

(g) dates of service to be purchased, if applicable; and

(h) number of years of "one-for-five" service to be purchased, if applicable. (2) MPERA shall provide written notification to the member of the type and amount of service eligible to be purchased, and the cost of that service. All cost statements are valid for 30 days. Written notification will include:

(a) cost statement;

(b) service purchase contract;

(d) rollover/transfer notification form.

(3) A member who chooses to purchase service must complete and return the service purchase contract and the applicable payment form to MPERA. The service purchase contract must indicate:

(a) the type of service the member wishes to purchase;

(b) whether the member intends to purchase all, or a specific portion of the service; and

(4) Service can be purchased in a lump sum, through monthly payments, or by a combination of both. Service purchases other than by lump sum are subject to interest as determined by MPERA and computed over the entire payment period.

(5) Lump sum payment methods include cash, personal check, and direct rollovers or trustee-to-trustee transfers from an eligible retirement plan or IRA.

(a) Lump sum payments by cash or personal check require completion of the service purchase contract only.

(b) Payment by direct rollover or trustee-to-trustee transfers from an eligible retirement plan require completion of the service purchase contract and the rollover/transfer notification.

(6) Monthly installment payments can be made after tax through cash or personal check, or pretax through payroll deductions.

(a) Monthly installment payments that come directly from the member to MPERA require completion of the service purchase contract only.

(b) Monthly installment payments through paycheck deduction require completion of the service purchase contract and the payroll deduction authorization.

(7) If a monthly installment payment made through cash or personal check is missed, the service purchase contract will terminate and the member will receive prorated service credit based on the amount previously paid.

(8) The type of service being purchased cannot be changed once the purchase commences.

AUTH: 19-2-403, MCA

IMP: 19-2-704, MCA

STATEMENT OF REASONABLE NECESSITY: Currently ARM 2.43.423(4) summarily addresses the forms required to purchase and pay for service within MPERA-administered retirement systems. It is not clear from the title of ARM 2.43.423 that information regarding the purchase process is contained in the rule. Additionally, the listed requirements are incomplete. This proposed rule satisfies the requirements of 19-2-704, MCA, and establishes the process required of all members purchasing service in their retirement systems. The rule clarifies that the cost of the service purchase is not locked in until a contract exists. It further clarifies that a contract is required whether the service is purchased through payroll deduction, personal monthly payments, a direct lump-sum payment, or a roll-over of a lump-sum amount from another eligible retirement plan. The new rule will assist members in the service purchase process and establishes a process that meets IRS guidelines regarding "pick-ups", thus maintaining our qualified status under IRS regulations.

NEW RULE VI PURCHASE OF SERVICE AT ACTUARIAL COST

(1) Members of an MPERA-administered retirement system who are eligible to and wish to purchase military, federal volunteer, one-for-five, out-of-state, Montana public service, or other public service from a previous retirement system to their current retirement system must pay the actuarial cost of that service.

(2) The actuarial cost of the service is determined as follows:

(a) The member's age and membership service as of the date of the request, each rounded to the nearest whole year, is used to determine the actuarial factor related to the number of years service to be purchased.

(b) The actuarial factor determined in (2)(a) is then multiplied by the member's compensation for the immediately preceding 12 months to determine the cost of the service to be purchased.

(3) A member of a retirement system is eligible to purchase only that service permitted to be purchased by statute.

AUTH: 19-2-403, MCA

IMP: 19-2-704, MCA

STATEMENT OF REASONABLE NECESSITY: Not all service purchases cost the same. This proposed rule assists members of the retirement systems and MPERA staff by listing in one location the types of service purchases which require payment of the actuarial cost of the service being purchased. "Actuarial cost" is a term not easily understood by anyone other than an actuary. The board believes it helpful to explain to members how actuarial cost is determined. Section (3), while seemingly obvious, will assist MPERA staff in responding to member questions regarding why they cannot purchase private or other ineligible employment into their public retirement system.

NEW RULE VII LIMITATIONS ON PURCHASES OF SERVICE (1) A PERS member may not purchase service unless and until the member elects to participate in the PERS Defined Benefit Retirement Plan.

(2) A retirement system member may not purchase the same period of military, federal volunteer service, or public service employment in more than one retirement system.

(3) A retirement system member may not receive service credit for any purchase of service related to any calendar month for which full service credit has already been granted.

AUTH: 19-2-403, MCA

IMP: 19-2-603, 19-2-715, 19-3-503, 19-3-515, 19-3-522, 19-5-410,

19-6-801, 19-7-803, 19-8-901, 19-9-403, 19-13-403, MCA

STATEMENT OF REASONABLE NECESSITY: New PERS members have one year in which to elect to participate in the defined benefit retirement plan or the defined contribution retirement plan. Pursuant to 19-3-522, MCA, defined contribution retirement plan members cannot purchase service. Section (1) is necessary to ensure that a PERS member who wishes to purchase service is in fact eligible to do so. Sections (2) and (3) are proposed to be moved from ARM 2.43.407 in order to group all service purchase limitations in one rule. They are also expanded to include service purchases recently approved by the Legislature, including federal volunteer service such as Peace Corps time.

NEW RULE VIII GUARANTEED ANNUAL BENEFIT ADJUSTMENT COVERAGE � PERS, SRS, AND GWPORS (1) Members of PERS, SRS, and GWPORS who terminate covered employment, accept a refund of their accumulated contributions, and return to covered employment in the same system on or after July 1, 2007, will be eligible for a 1.5% GABA.

(2) Purchase of the refunded time does not affect the member's new hire date. The member will remain eligible for the 1.5% GABA, not the 3.0% GABA associated with the refunded time.

AUTH: 19-2-403, MCA

IMP: 19-2-603, 19-3-1605, 19-7-711, 19-8-1105, MCA

STATEMENT OF REASONABLE NECESSITY: The 2007 Legislature reduced GABA from 3% to 1.5% for PERS, SRS, and GWPORS members who are hired on or after July 1, 2007. The board believes it necessary to clarify that members hired on or after July 1, 2007 who previously were refunded their accumulated contributions for service prior to July 1, 2007, cannot qualify for the 3% GABA by purchasing that refunded time. Service prior to July 1, 2007 cannot qualify a new member for the 3% GABA if that member previously refunded the service because individuals who terminate employment and refund their service are no longer members of the retirement system. Their GABA must be based on their new hire date.

NEW RULE IX DESIGNATION OF BENEFICIARY BY MEMBERS, RETIREES, ALTERNATE PAYEES, AND CONTINGENT ANNUITANTS (1) A retiree, alternate payee, or contingent annuitant shall make the selection of beneficiary in writing and on the form provided by MPERA, dated and signed by the individual participant, and witnessed by a disinterested third party.

(2) The designation of beneficiary shall be effective immediately upon filing with MPERA.

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

STATEMENT OF REASONABLE NECESSITY: The designation of beneficiary process for retirees and for participants other than retirement system members is not adequately covered in statute, particularly with respect to the effective date of the designation. The board believes a rule regarding a retiree's and a participant's designation of beneficiary is needed to adequately inform retirees and participants of the process for designating beneficiaries.

NEW RULE X FIREFIGHTERS' MINIMUM BENEFIT ADJUSTMENTS

(1) When a city belonging to FURS has not negotiated a salary agreement with its actively employed firefighters by July 1 of any year, MPERA shall take the following actions:

(a) Retirement benefits will be paid to non-GABA retirees from that city using the most recent base salary for a newly confirmed firefighter negotiated by the city and reported to MPERA.

(b) When a salary agreement is negotiated by the city and MPERA is notified of a change in base pay for the city's newly confirmed firefighters, retirement benefits will be recalculated and adjustments paid retroactively to non-GABA retirees from that city.

(c) Updated reports will be sent to the State Auditor certifying the increased retirement benefits payable from insurance premium tax funds during a given fiscal year as those amounts become known.

AUTH: 19-2-403, MCA

IMP: 19-13-1007, MCA

STATEMENT OF REASONABLE NECESSITY: The retirement benefit to which this rule applies is for members of FURS who became active prior to July 1, 1997 and did not choose to participate in the guaranteed annual benefit adjustment (GABA) provided for in 19-13-1010 and 19-13-1011, MCA. Those individuals receive a retirement benefit increase based on the salary paid by their last employer to newly confirmed firefighters. The rule is necessary to address those instances when the city and the firefighters have not completed contract negotiations prior to July 1st.

NEW RULE XI HIGHWAY PATROL OFFICERS' MINIMUM BENEFIT ADJUSTMENTS (1) When the state of Montana has not negotiated a salary agreement with its actively employed highway patrol officers by July 1 of any year, MPERA shall take the following actions:

(a) Retirement benefits will be paid to non-GABA retirees using the most recent base salary for a newly confirmed highway patrol officer negotiated by the state and reported to MPERA.

(b) When a salary agreement is negotiated by the state and MPERA is notified of a change in base pay for newly confirmed highway patrol officers, retirement benefits will be recalculated and adjustments paid retroactively to non-GABA retirees.

AUTH: 19-2-403, MCA

IMP: 19-6-707, MCA

STATEMENT OF REASONABLE NECESSITY: The retirement benefit to which this rule applies is for members of HPORS who became active prior to July 1, 1997 and did not choose to participate in the guaranteed annual benefit adjustment (GABA) provided for in 19-6-710 and 19-6-711, MCA. Those individuals receive a retirement benefit increase based on the salary paid by the state to newly confirmed highway patrol officers. The rule is necessary to address those instances when the state and the highway patrol officers have not completed contract negotiations prior to July 1st.

NEW RULE XII PAYMENTS TO SERVICE PROVIDERS FOR FUNERAL EXPENSES RESULTING FROM DUTY-RELATED DEATH (1) Payments for funeral expense claims made pursuant to Title 19, chapter 17, part 5, MCA, will be paid directly to funeral service providers after:

(a) the claim is properly filed as described in 19-17-503, MCA; and

(b) all personal and/or group insurance payments for those services first have been deducted from the claim.

(2) Funeral expense claims in excess of $1,000 must be approved by the board prior to payment by MPERA.

(3) Subsequent insurance settlements in payment of funeral expenses which have been previously paid by the board shall be reimbursed to the pension fund within 60 days of receipt by member or service provider.

AUTH: 19-17-203, MCA

IMP: 19-17-505, 19-17-506, MCA

STATEMENT OF REASONABLE NECESSITY: Although statute grants the board authority to authorize payment of funeral expenses under certain conditions, nothing in rule or statute establishes the mechanism by which to apply for that payment. The board proposes to adopt a rule for recovery of funeral expenses that is similar to the rule that addresses recovery of medical expenses, ARM 2.43.804. This new rule ensures a process exists and is followed, and that MPERA pays no more than $1,000 absent board approval.

NEW RULE XIII DEFINITIONS (1) Domestic Relations Order (DRO) is a draft document designed to divide a participant's 457 account pursuant to a domestic relations order.

(2) Qualified Domestic Relations Order (QDRO) is a domestic relations order that has been approved by the board.

AUTH: 19-50-102, MCA

IMP: 19-50-102, MCA

STATEMENT OF REASONABLE NECESSITY: The board believes it would be helpful to specify the differences between a domestic relations order and a qualified domestic relations order. The board also prefers to define and use acronyms throughout the rules to save space and to promote ease of reading.

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

2.43.203 (2.43.1501) REVIEW OF ADMINISTRATIVE DECISION (1) An "administrative decision" means a decision issued by ~~the~~ MPERA that determines an individual's or an entity's legal rights, duties, or privileges pursuant to the provisions of Title 19, MCA.

(2) Parties who disagree with the administrative decision may appeal the decision to the board within 90 days of the date of written notification.

~~(2)~~ (3) Administrative decisions that are appealed to the board will be initially decided by the board on the basis of material properly submitted by MPERA and the appealing party, and such other information as the board deems appropriate. The board may, on its own motion, postpone its initial decision until the next regularly scheduled board meeting.

~~(3)~~ (4) The board will notify the appealing party of its initial decision in writing. If the decision is adverse to the appealing party, the board will include a general statement of the reasons for its decision, which need not be exhaustive. The appealing party will be given two options, either of which must be exercised within 30 days of the date of written notification:

(a) any appealing party may submit a request in writing for reconsideration by the board; or

(b) an appealing party, other than a governmental entity, may submit a request in writing for a contested case proceeding.

~~(4)~~ (5) A reconsideration by the board will be based on facts and matters submitted by the appealing party and MPERA to the board, the testimony of the appealing party before the board, and the presentation of the appealing party and MPERA, or their legal counsel, to the board.

(a) Unless otherwise ordered by the board pursuant to ~~(4)(b)~~ (5)(c), facts and matters may be submitted any time after the board's initial decision is issued until 21 days prior to the third regularly scheduled board meeting following issuance of the initial decision.

(b) Any response to submitted facts and matters must be provided to the opposing party no later than seven days prior to the regularly scheduled board meeting at which the matter will be considered.

(c) The board may, prior to issuing its decision on reconsideration and on its own motion, require the appealing party, MPERA, or both to submit additional facts and matters relevant to the issue before the board. The board may also, on its own motion, postpone its decision on reconsideration. However, in no case may the board prolong issuance of its decision on reconsideration for more than six months following issuance of its initial decision.

~~(c)~~ (d) The board will notify the party in writing of its decision on reconsideration. That decision will become final and will not be subject to a contested case proceeding or judicial review unless a party other than a governmental entity files a written request for a contested case proceeding within 30 days of the written notice of decision on reconsideration.

~~(5)~~ (6) The board's initial decision or decision on reconsideration, if appropriately requested, is final with respect to a party which is a governmental entity, and may not be appealed by that entity.

~~(6)~~ (7) ~~The~~ MPERA's administrative decision, the board's initial decision, and its decision on reconsideration will be mailed to the ~~appealing party~~ affected parties. The time period for requesting further review of ~~either decision~~ any of the decisions will commence on three days following the ~~day~~ date of the letter notifying the parties of the decision ~~notice is mailed by MPERA staff, as indicated at the bottom of the decision~~. ~~Rule 6(e), M.R.Civ.P., does not apply and no additional time will be added because the decision is mailed.~~

~~(7)~~ (8) If a party fails to exercise an available option within the time allowed by the board, the board's decision becomes final and is not subject to contested case proceedings or judicial review. Thereafter, a party may only appear before the board on the same matter based on new and different facts that are not ~~cumulative or~~ repetitive, and for good cause shown.

~~(8)~~ (9) Unless otherwise provided, time periods ~~provided herein~~ may be enlarged only in writing by the board or its authorized representative and only on requests made prior to the expiration of the time period.

AUTH: 19-2-403, MCA

IMP: 19-2-403, MCA

STATEMENT OF REASONABLE NECESSITY: There is currently no time limit regarding the appeal of a staff determination to the Public Employees' Retirement Board. A time limit is needed to ensure timely resolution of issues important to the financial status of members and employers. The 90 day time period provided for in (2) is believed by the board to be necessary to ensure adequate time for the appealing party to obtain information needed to support their position.

Time frames for appealing matters generally include a three day window for mailing. The board believes the current rule eliminating that three day window is an unnecessary procedural technicality that can inadvertently foreclose the appeal of a substantive issue important to members, employers, and the board. Therefore, the board proposes to insert the three day window typically followed when motions and appeals are mailed. The board also sees no reason to require the date of a decision to be at the bottom of the document. A standard date placement near the top of the document is adequate to provide notice of the start of the appeal time.

2.43.204 (2.43.1502) CONTESTED CASE PROCEDURES (1) Contested cases will be presided over and heard by a quorum of the board or a hearing examiner who may be any individual appointed by the board, including any board member.

(a) A party may seek to disqualify a hearing examiner only on the basis of a prehearing motion and affidavit containing an affirmative showing of prejudicial personal bias or lack of independence. The hearing examiner will rule on the motion or voluntarily ~~recuse (disqualify)~~ disqualify himself or herself. The ruling will not be reviewed by the board ~~except when the personal bias or lack of independence is demonstrated by reference to the hearing examiner's proposed findings of fact, conclusions of law, and order~~.

(b) The hearing examiner has general authority to regulate the course of contested cases and may exercise the power and authority provided or implied by law, including 2-4-611, MCA.

(c) The hearing examiner may establish prehearing and hearing dates and procedures, rule on procedural matters, make proposed orders, findings and conclusions, and otherwise regulate the conduct and adjudication of contested cases as provided by law. The hearing, unless the parties stipulate otherwise, shall be conducted in the following order:

(i) the statement and evidence of the party opposing the board's initial decision or decision on reconsideration;

(ii) the statement and evidence of ~~the~~ MPERA; and

(iii) rebuttal testimony.

(d) The contested case hearing must be conducted in Helena. The parties and their witnesses must appear in person unless, for good cause shown, the hearing examiner determines otherwise.

(e) The hearing examiner shall enter proposed findings of fact, conclusions of law, and order, with any necessary explanation, for review and final determination by the board.

(f) The jurisdiction and authority of a hearing examiner terminates upon the entry of a proposed order unless the board delegates further authority.

(2) Exceptions to proposed findings of fact, conclusions of law, and orders that are allowed by statute must be filed with ~~the~~ MPERA and served upon opposing counsel within 20 days of service of the proposed findings, conclusions, and order. Any response must be filed within 10 ten days of service of the exceptions.

(a) Briefs in support are not required, but if filed, must be filed simultaneously with exceptions or responses.

(b) Requests for oral argument must be in writing, and must be filed simultaneously with the exceptions or responses.

(c) Date of service shall be the date indicated on the appropriate certificate of service or certificate of mailing. ~~The date of filing shall be the date of actual delivery or the postmarked date of mailing.~~

(d) The board may request briefing, additional briefing, or oral argument by the parties.

(e) The board's final decision must be issued no later than 90 days after the matter is submitted to the board, unless, for good cause shown, the period is extended for an additional time not to exceed 30 days.

(3) If a quorum of the board hears the contested case, the board may use a hearing examiner for procedural rulings and administrative purposes, and to assist in the drafting of a final order. A final order so adopted will be the final administrative decision of the board, subject only to judicial review.

(4) An attorney may be assigned to present a case or to appear in any contested case to represent the interests of MPERA ~~or the board~~. A different attorney will be assigned to assist the board in reaching its determinations with respect to that contested case.

(5) A contested case hearing, and any other proceeding before a hearings examiner, will be recorded electronically unless a party notifies the hearing examiner no later than 20 days prior to the proceeding that the party wants to retain a ~~stenographic record~~ court reporter for the hearing. The party ~~requiring a stenographic record~~ requesting the court reporter must arrange and pay for the court reporter.

(a) ~~Any electronic or~~ ~~stenographic~~ The record shall be transcribed on the request of any party. The cost of the transcription shall initially be paid by the requesting party. A party who has a transcript prepared shall provide a copy to any other party requesting it in exchange for the proportional cost of transcribing the original and the necessary copies. A copy must also be provided to the hearing examiner, at no cost.

(b) The party(ies) filing exceptions to the hearing examiner's proposed order must file the original and ~~a total of eightcopies~~ one copy of the transcript with the board only if exceptions have been filed to the hearing examiner's proposed findings of fact.

(c) If an electronic recording of any hearing or proceeding is defective or cannot be transcribed, the hearing examiner may reconstruct the record or the parties may reconstruct the record by stipulation. The record so reconstructed will constitute the record for determination and review of findings of fact.

AUTH: 19-2-403, MCA

IMP: 19-2-403, MCA

STATEMENT OF REASONABLE NECESSITY: The current language in (1)(a) is internally inconsistent. A prehearing motion cannot be used to allege personal bias or lack of independence within proposed findings, conclusions, and order. Motions to disqualify should be based on information known at the time a hearing examiner is appointed; not on the content of the proposed findings, conclusions, and order. If bias or lack of independence exists within the proposed order, the issue can be raised as part of the exceptions filed with the board pursuant to (5)(b).

Subsection (2)(e) is proposed to ensure the board's contested case proceedings comply with the time limitations set forth in 2-4-623, MCA. That statute was amended in 2005 to provide a time frame for the issuance of a final decision following submission to the final, nonjudicial decision maker. The board believes the statute should be included in the board's contested case procedures to eliminate any confusion as to its applicability.

The terms "filed" and "filed with the board" are now defined in ARM 2.43.302. The board proposed to delete the sentence in (2)(c) as it is inconsistent with the definition found in ARM 2.43.302.

The remaining proposed changes reflect changes in board personnel and board processes. The board now employs two attorneys. Section (4) avoids potential conflict by ensuring that the attorney representing MPERA is not the attorney representing the board. Stenographic records have been replaced with recordings. Finally, board personnel will, in the future, copy hearing transcripts for each board member. Therefore, only one copy need be filed with the board.

2.43.205 (2.43.1503) REGULATIONS APPLICABLE TO CONTESTED CASES (1) To the extent these rules do not provide for or specify procedures, or where necessary to supplement these rules, ~~the provisions of the Montana Administrative Procedure Act and attorney general's model rules apply. The~~ the Montana Administrative Procedure Act, Montana Rules of Civil Procedure, Montana Uniform District Court Rules, or Montana Rules of Evidence may be utilized to the extent that they clarify fair procedures, expedite determinations, and assist in the adjudication of rights, duties, or privileges of parties.

AUTH: 19-2-403, MCA

IMP: 19-2-403, MCA

statement of reasonable necessity: The board proposes to delete language that is either redundant or inconsistent with ARM 2.43.201. ARM 2.43.201 addresses applicability of the Attorney General's model rules. There is no need to address the Attorney General's model rules again in this rule.

2.43.301 (2.43.1301) RETIREMENT SYSTEMS COVERED (1) Except where specifically noted, all the rules ~~stated herein~~ in this subchapter are in effect for the following retirement systems:

(a) Public Employees' (PERS);

(b) Game Wardens' and Peace Officers' (GWPORS);

(d) Highway Patrol Officers' (HPORS);

(e) Sheriffs' (SRS);

(f) Municipal Police Officers' (MPORS); and

(g) Firefighters' Unified (FURS).

(2) Each of the above-listed retirement systems also have their own subchapter containing rules unique to that system. Both this subchapter and the subchapter designated for a particular retirement system should be consulted when determining applicable administrative rules.

AUTH: ~~19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201, and 19-13-202~~ 19-2-403, MCA

IMP: ~~19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201, and 19-13-202~~ 19-2-403, MCA

statement of reasonable necessity: The board is revising the format of its rules to reflect the format of the retirement system statutes found in Title 19, MCA. This subchapter will now address rules common to all defined benefit retirement systems administered by the board. Other subchapters will address rules applicable to individual retirement systems. Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

2.43.302 (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) "Additional service" means one year of service for each five years of membership service as explained in ARM 2.43.432.

~~(1)~~ (2) "Benefit recipient" means any retired member, contingent annuitant, or survivor who receives a monthly benefit payment from a retirement system. It does not include a beneficiary who receives a lump-sum payment or an annuity.

~~(2)~~ (3) "Board" means the Montana Public Employees' Retirement Board.

~~(3)~~ (4) "Contested case" means a legal proceeding, as set forth in these rules, subsequent to preliminary administrative determination.

~~(4)~~ (5) "Contingent beneficiary" means a beneficiary designated to receive payments if all primary beneficiaries are deceased. Contingent beneficiaries will be on a share and share alike basis, unless the member specifies otherwise.

~~(5)~~ (6) "Continuous employment" means a member serves in full-time, part-time, or seasonal employment, but does not terminate service nor withdraw the accumulated contributions from the member's account.

(7) "DBRP" means the defined benefit retirement plan within PERS.

(8) "DCRP" means the defined contribution retirement plan within PERS.

~~(6)~~ (9) "Employment" or "reemployment" means the performance of services for an employer by a person other than an independent contractor. If any of the four factors listed in ~~(10)~~ (16) indicate control or direction by the employer, an employment relationship exists.

~~(7)~~ (10) "Filed" or "filed with the board" generally means the mailing of a form or payment in a stamped envelope which is properly addressed to ~~the~~ MPERA or the board. The postmark date will be used to determine the date on which filing occurs. If the form or payment is hand-delivered, it is considered filed on the day it is personally delivered to the MPERA office. If the form is faxed to MPERA or the board, 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. A form cannot be filed by e-mail as a an original signature is required.

~~(8)~~ (11) "Full-time employment" for service credit, means an employer or employers paid the member for at least 160 hours during a calendar month. A member may not receive more than one month credit for months in which the member receives pay for more than 160 hours.

~~(9)~~ (12) "Full-time public service employment" means full time employment which when it was performed was not covered by a system referred to in 19-2-302, MCA, and may not otherwise be credited in a retirement system.

(13) "FURS" means the Firefighters' Unified Retirement System.

(14) "GWPORS" means the Game Wardens' and Peace Officers' Retirement System.

(15) "HPORS" means the Highway Patrol Officers' Retirement System.

~~(10)~~ (16) "Independent contractor" means an individual who renders service in the course of an occupation and is both:

(a) engaged in an independent trade, occupation, profession, or business; and

(b) under contract and in fact, at all times free from control or direction over the performance of the services.

(i) ~~The~~ MPERA may consider but is not limited to the following factors when determining freedom from control and direction:

(A) right or exercise of control of the means by which the work is accomplished;

(B) method of payment (time basis indicates employment);

(D) employer's right to fire.

(ii) Independent contractor status may only be established by a convincing accumulation of these factors indicating freedom from control or direction over performance of the services.

(17) "JRS" means the Judges' Retirement System.

~~(11)~~ (18) "MPERA" means the Montana Public Employee Retirement Administration.

(19) "MPORS" means the Municipal Police Officers' Retirement System.

~~(12)~~ (20) "Part-time employment" for service credit, means an employer or employers paid a member for less than 160 hours during a calendar month.

~~(13)~~ (21) "PERS" means the Public Employees' Retirement System.

~~(14)~~ (22) "Primary beneficiary" means a beneficiary designated to receive payments upon the death of a member. Primary beneficiaries will be on a share and share alike basis, unless the member specifies otherwise.

~~(15)~~ (23) "Seasonal employment" means employment ~~within a calendar or fiscal year which is less than 6 months duration. Seasonal employment occurs on an on going basis during the same months in succeeding years~~ of a permanent employee who is designated by an agency as seasonal, who performs duites interrupted by the seasons, and who may be recalled without the loss of rights or benefits accrued during the preceding season.

~~(16)~~ (24) "Service years" or "years of service" means periods of 12 calendar months of membership service which qualify members for retirement or other benefits.

(25) "SRS" means the Sheriffs' Retirement System.

~~(17)~~ (26) "Survivor" means the designated or statutory beneficiary of a member who dies while in service.

(27) "VFCA" means the Volunteer Firefighters' Compensation Act.

AUTH: 19-2-403, MCA

IMP: ~~Title 19, Ch. 2, 3, 5, 6, 7, 8, 9, 13~~ 19-2-403, MCA

statement of reasonable necessity: Pursuant to 19-3-513, 19-5-409, 19-6-804, 19-7-804, 19-8-904, 19-9-411, and 19-13-405, MCA, "additional service" is a defined term used when referencing "one-for-five" service. Previous rules have used the term incorrectly. Inclusion of the correct definition within the rules, along with the correct use of the term throughout the rules, is needed for accuracy and correct understanding of the rules.

Section (10) is proposed to be amended to recognize that signatures can now be affixed to e-mail messages. However, since there is no guarantee the signator is the person who affixed the signature to the message, the board will not recognize the document as having the required signature. Section (23) is proposed to be amended to adopt the definition of seasonal employment used by the Department of Administration and found at 2-18-101(23), MCA.

Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

2.43.303 (2.43.1405) REQUEST FOR RELEASE OF INFORMATION ~~BY MEMBERS~~ (1) Telephone requests from system members or benefit recipients for general information will be handled in a manner most efficient to both the member or benefit recipient and ~~the division~~ MPERA, subject to written verification.

(2) Specific information, particular to a member or benefit recipient's account, will only be released by MPERA upon receipt ~~by the division~~ of a written authorization signed by the member or benefit recipient.

(3) The ~~administrator~~ executive director may release information to governmental agencies with statutory authority to access specific information. The requesting agency must submit the request in writing citing proper legal authority to obtain the specific information.

AUTH: 19-2-403, ~~19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201, 19-13-202,~~ MCA

IMP: ~~Title 19, Ch. 2, 3, 5, 6, 7, 8, 9, 13~~ 19-2-403, MCA

statement of reasonable necessity: There is no longer a Public Employees' Retirement Division (PERD or division). It is now the Montana Public Employee Retirement Administration (MPERA). The division's "administrator" is now the "executive director."

2.43.308 (2.43.1406) MAILING FOR NONPROFIT ~~GROUPS~~ RETIREE ORGANIZATIONS (1) ~~The division~~ MPERA may mail materials or contract to have materials mailed to retirees for eligible nonprofit retiree ~~groups~~ organizations. ~~The division may send the materials to retirees, or to members requesting estimates of their retirement benefits.~~

(a) Contractors who mail materials for eligible nonprofit retiree organizations must agree to keep addresses confidential and to destroy all address sources immediately following completion of the mailing.

(b) The information may also be sent to system participants as a part of or in addition to regular newsletters.

(2) Eligible nonprofit ~~groups are limited to groups formed for participants of board-administered retirement systems. The group~~ retiree organizations must be tax exempt under section 501(c)(4) of the Internal Revenue Code. It They must also hold a nonprofit mailing permit from the U.S. Postal Service ~~in Helena, Montana~~.

(3) ~~The division~~ MPERA will provide application forms. A nonprofit ~~group~~ retiree organization must submit an application to ~~the division~~ MPERA at least one month before any mailing. An application packet must contain:

(a) an application form signed by an officer of the ~~non-profit~~ ~~group~~ organization;

(b) a copy of the IRS letter exempting the ~~group~~ organization under section 501(c)(4) of the tax code;

(d) if requesting bulk mailing, a copy of the ~~group's~~ organization's current U.S. Postal Mailing Permit; and

(e) an exact copy of the materials to be mailed.

(4) Upon approval, ~~the division~~ MPERA will ~~bill~~ provide the nonprofit retiree organization ~~for~~ the estimated cost of the mailing. For bulk mailing, ~~the division~~ MPERA will provide a proposed completion date. ~~The organization must pay the total estimated cost at least 10 working days before the mailing.~~

(5) When the mailing is complete, ~~the division~~ MPERA will bill the nonprofit retiree organization for ~~any additional~~ the cost of the mailing. For mail inserted with estimates, ~~the division~~ MPERA will send the ~~group~~ organization a bill each month. All charges must be paid within 30 days of billing. Thereafter, ~~the division~~ MPERA will charge the greater of interest at 9% compounded monthly from the billing date or $10 per day.

AUTH: 19-2-403, MCA

IMP: 2-6-109, 19-2-403, MCA

statement of reasonable necessity: There is no longer a Public Employees' Retirement Division (PERD or division). It is now the Montana Public Employee Retirement Administration (MPERA).

Section 2-6-109, MCA, permits the board to use its mailing lists to send materials to retirement system participants on behalf of certain nonprofit retiree organizations. The term "group" is too vague and is therefore being replaced with "nonprofit retiree organization" the first time the term is used in each subsection and with "organization" when "group" is later used in each subsection. Section 2-6-102, MCA was amended in 1997 to reference the term "organization" rather than "third party". This proposed change is therefore consistent with statute.

Given the increase in participants, MPERA has found it easier and less time consuming to contract with publishing companies to provide the permitted mailings. However, confidential information must remain confidential. The proposed language in (1)(a) mirrors that used in contracts between MPERA and the publishing companies.

Requests come from nonprofit retiree organizations located all over the state and are mailed out by publishing companies state-wide. A Helena nonprofit mailing permit is no longer necessary.

2.43.309 (2.43.1407) ACCEPTABLE MATERIALS -- NONPROFIT RETIREE ORGANIZATION MAILING (1) ~~The division~~ Pursuant to ARM 2.43.308, MPERA will mail materials which conform to the following criteria:

(a) the packet of materials mailed to each person must be identical;

(b) each packet may include an application for membership in the nonprofit ~~group~~ retiree organization and general information about the ~~group's~~ organization's activities. ~~No piece may urge or recommend~~ Material recommending actions that are not within the nonprofit nature and scope of the ~~group~~ organization are prohibited. For example, ~~a group~~ an organization may not urge voting for a particular individual or joining another ~~or affiliated group~~ organization or affiliation.

(2) Each piece inserted with retirement estimates must be one single page, no larger than 8 1/2 inches by 17 inches, folded to fit within a regular business envelope. It may not be stapled or sealed in any manner.

(3) Each packet for bulk mailing must meet current postal requirements and must be printed with the ~~group's~~ nonprofit retiree organization's nonprofit mailing permit.

AUTH: 19-2-403, MCA

IMP: 2-6-109, 19-2-403, MCA

STATEMENT OF REASONABLE NECESSITY: There is no longer a Public Employees' Retirement Division (PERD or division). It is now the Montana Public Employee Retirement Administration (MPERA).

Subsection (1)(b) is rewritten to promote clarity and understanding, and to use terms consistent with those in statute.

2.43.310 (2.43.1408) RIGHT TO BE EXCLUDED -- NONPROFIT RETIREE ORGANIZATIONS (1) Any member or other person receiving benefits from a retirement system may request to be excluded from receiving, pursuant to ARM 2.43.308, a mailing on behalf of all nonprofit retiree organizations by submitting a written request to ~~the division~~ MPERA.

(2) Requests for exclusion will become effective no later than 30 days after ~~the division~~ MPERA receives the signed written request.

AUTH: 19-2-403, MCA

IMP: 2-6-109, 19-2-403, MCA

STATEMENT OF REASONABLE NECESSITY: There is no longer a Public Employees' Retirement Division (PERD or division). It is now the Montana Public Employee Retirement Administration (MPERA).

ARM 2.43.308 is included in order to clarify the mailings to which this rule applies.

Section 2-6-109, MCA, permits the board to use its mailing lists to send materials to retirement system participants on behalf of certain nonprofit retiree organizations. Current language references any type of nonprofit organization when the rule should be limited to nonprofit retiree organizations in order to comply with statute.

2.43.402 (2.43.2104) MEMBERSHIP CARDS (1) Each ~~contributing employee~~ member must complete a membership card upon employment, name change, or change of beneficiary, and ~~this~~ return the card to their employer. The card must be immediately forwarded by the ~~employing agency~~ employer to ~~the retirement division~~ MPERA.

~~(2) No benefit will be processed, or refund of contributions made, unless the division has a completed membership card on file.~~ The designation of beneficiary is only effective upon receipt by MPERA.

(2) If a member accepts a temporary or second job covered by the same retirement system as their other existing job, the member must:

(a) indicate "temporary" or "dual employment" status on the card; and

(b) leave the beneficiary nomination section blank unless the member intends to override their beneficiaries currently on file with MPERA.

AUTH: ~~19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201, 19-~~ ~~13-202~~ 19-2-403, MCA

IMP: ~~19-3-401, 19-5-602, 19-6-602~~ 19-2-801, 19-6-505, ~~19-7-602, 19-8-702, 19-9-912~~ 19-9-1102, 19-13-903, MCA

STATEMENT OF REASONABLE NECESSITY: A "contributing employee" is typically referred to as a "member." Use of the correct term promotes clarity and understanding. Current language is less than clear regarding MPERA's requirement that the member give the membership card to their employer, who is to then forward the membership card to MPERA. This process is required to ensure that MPERA does not receive multiple, perhaps conflicting, cards for one employee. It also ensures that the employer is aware of address changes.

MPERA has determined that a completed membership card is not necessary before refunds can be issued. Membership cards are used to identify the member's beneficiaries. That information is not needed when issuing a refund directly to the member. On occasion, refunds have been delayed pending a search for a missing membership card. The proposed amendment will eliminate this possibility.

Membership cards are required for each covered employment. Occasionally, retirement system members engage in a second occupation which requires the filing of an additional membership card. One example is covered employees who fight fire for the Montana Department of Natural Resources and Conservation while on vacation from their primary job. It has come to MPERA's attention that membership cards filed for temporary or secondary employment often fail to identify the member's beneficiaries. Without the proposed rule language, the member's intended beneficiaries may be incorrectly overridden by MPERA. The proposed language will ensure correct beneficiary information.

2.43.403 (2.43.2102) OPTIONAL MEMBERSHIP (1) Employees for ~~which~~ whom membership in ~~a retirement system~~ PERS is optional may become members by completing an application ~~form~~ provided by the board. The application ~~form~~ must be filed ~~with the board~~ within the time set in applicable statute. Membership becomes effective upon filing and is not retroactive except as provided in (5) ~~180 days of commencement of the employment for which membership is optional, or within 180 days of the effective date of the statute permitting optional membership, whichever is later~~. Except as provided in (2), once elected, members may not discontinue membership without termination of employment.

(2) The board may permit an employee to discontinue optional membership if the employee submits proof that the employee was not informed membership was optional. The employee must submit such proof within 180 days of the employee's first day of employment, or within 180 days of the filing of the application form, whichever is later.

~~(3)~~ (a) Membership discontinued pursuant to (2) must be treated as a reporting error and will be corrected pursuant to ARM 2.43.409.

(b) The board shall issue a credit to the employer for all erroneous contributions~~, plus interest, to the employer~~.

(3) If an employer discovers that an eligible employee was not notified of the option to join PERS, the employer must:

(a) provide the employee the optional membership application form immediately upon discovery of the omission;

(b) notify the employee that the application must be completed within 180 days of employment, or within 30 days after receipt of the application, whichever is later; and

(4) If, pursuant to (3), the employee elects not to become a member of PERS, the employer must still report the employee to MPERA as a nonmember pursuant to ARM 2.43.404.

(5) If, pursuant to (3), the employee elects to become a member of PERS, membership will begin the first day of the first pay-period for which the employer reports the employee as a member of PERS and pays PERS contributions on behalf of the member. Membership will not be retroactive. However, a member electing the DBRP may chose to purchase the retroactive service under 19-3-505, MCA.

AUTH: 19-2-403, MCA

IMP: 19-2-903, 19-3-412, ~~19-13-301,~~ MCA

STATEMENT OF REASONABLE NECESSITY: PERS is the only MPERA-administered public employee retirement system with optional membership provisions. Part-paid firefighters in FURS are addressed adequately in statute. Optional membership elections must, pursuant to 19-3-412(3), MCA, be filed within 180 days of employment. There is no need to restate statutory requirements within the rule.

Section 19-3-412, MCA, is silent regarding the retroactive nature of the optional membership election. However, an employee cannot become a member of a retirement system until contributions are paid into the system on the member's behalf. Therefore, new section (6) clarifies that membership does not start until the election has been filed and contributions commence. Members need to be aware that service prior to that time is retroactive service and can be purchased by the member, then credited to their PERS account.

Incorrect information regarding PERS membership and PERS optional membership leads to reporting errors. Proposed new language in (2) and new sections (3), (4), and (5) are necessary to inform employees and employers of the process for correcting the reporting error and the effective date of the correction. Information regarding the effective date of the correction is especially pertinent now that PERS members have one year from first being reported to PERS to choose whether to participate in the defined benefit or the defined contribution retirement plan.

Language in subsection (2)(b) regarding the crediting of contributions was adopted prior to July 1, 1985, when contributions were remitted on an after tax basis and interest could be credited back to the employer. Now that contributions are paid pretax, only the exact amount of contributions can be credited to the employer in the event of a reporting error.

2.43.404 (2.43.2114) REQUIRED EMPLOYER REPORTS (1) All reporting agencies shall ~~submit~~ file required employer reports, other than working retiree reports required by ARM 2.43.506, no later than five working days after each regularly occurring payday.

(a) Each report must be accompanied by statutorily required employer and employee contributions to the retirement system. The required contribution rate is the rate in effect at the time the employees are paid, and not the contribution rate in effect when the compensation was earned.

~~(a)~~ (b) Beginning July 1, 2003, reporting agencies shall use ~~the~~ MPERA's online web-based reporting system and shall remit payment via automated clearing house (ACH).

~~(b)~~ (c) If the reporting agency does not have access to the internet, the employer reports may be either hard-copy or electronic, but must be in the format provided by ~~the~~ MPERA, and must be accompanied by the payment of applicable contributions.

(2) The report must be in alphabetical order by last name and contain for each employee, ~~including any state or local elected official who is an active member of PERS~~ regardless whether the employee is a member of a MPERA-administered retirement system or not:

(a) social security number;

(b) last and first name;

(d) regular contributions, if any;

(e) ~~additional~~ service purchase contributions, if any;

(f) the actual hours for which the employee received compensation; and

(g) each employee who terminated during the pay period being reported.

(3) In addition to the information contained in (2), employers must also provide the home addresses of employees who are members of an MPERA-administered retirement system. Home addresses of nonmembers are not required.

(4) Reports filed by PERS employers must also include any state or local elected official.

(5) Reporting agencies of the Montana university system (MUS) shall report employees in PERS covered positions who elect the MUS optional retirement program (ORP). The MUS ORP report must include all information required in (2). At the same time, reporting agencies of the MUS shall transmit amounts equal to the statutorily required plan choice rate and the education fund rate for those employees.

(4) Reporting errors affecting defined benefit plan members may be corrected on subsequent pay period reports via a letter of explanation that must include all salary and service documentation for the reported error and the affected time period. The MPERA will then notify the reporting agency of the necessary action, including contributions and interest due.

~~(5) Reporting errors affecting PERS members who elect the PERS defined contribution retirement plan (DCRP) will be corrected as follows:~~

~~(a) Corrections increasing a contribution will be credited to the participant's individual account within the timeframe established in ARM 2.43.1031 and will not be retroactive.~~

~~(b) Corrections reducing a contribution will decrease the participant's individual account.~~

~~(i) The DCRP recordkeeper will recover the incorrect contribution from the participant's individual account and submit a refund to the MPERA.~~

~~(ii) The MPERA will submit the refund to the reporting agency.~~

~~(iii) It is the reporting agency's responsibility to correct payroll records and submit the refund to the DCRP participant.~~

~~(6) Corrections reducing an employee's contribution cannot be accepted if the employee has received a refund.~~

AUTH: 19-2-403, ~~19-3-2104,~~ MCA

IMP: 19-2-506, 19-3-315, 19-3-316, 19-3-412, 19-3-1106, ~~19-3-2104~~

19-3-2117, 19-7-1101, MCA

STATEMENT OF REASONABLE NECESSITY: The current rule contains three distinct topics: (1) employer reporting requirements; (2) correction of reporting errors within the defined benefit retirement plan (DBRP); and (3) correction of reporting errors within the defined contribution retirement plan (DCRP). The board believes that placing each topic into its own rule would promote clarity and ease of understanding. Separate rules would also better educate employers regarding the different reporting requirements for the two plans. Therefore, ARM 2.43.404 is proposed to address reporting requirements while New Rule I will address DBRP corrections and New Rule II will address DCRP corrections.

PERS and SRS employer contribution rates changed effective July 1, 2007. Some PERS employers with a pay period containing days in June 2007 and days in July 2007 were unclear when to commence reporting, and contributing, the higher rate. Subsection (1)(a) is necessary to notify employers of the board's standard reporting requirement � contributions are to be paid based on when the compensation is reported to the board, and not when the compensation is earned. Therefore, the new contribution rate was effective for pay periods reported to the board on or after July 1, 2007, regardless when the compensation was earned. The same will be true for any future contribution rate changes.

Section 19-2-506(3), MCA, requires the board to adopt employer reporting rules that address both member and nonmember employees. New language in (2) clarifies that reporting requirements apply to all employees, not just employees who are members of board-administered retirement systems.

"Additional contributions" other than service purchases are no longer allowed by statute.

2.43.405 (2.43.2101) MEMBERSHIP (1) An eligible employee becomes a member of a retirement system on his first day of covered employment under that system.

(2) A member of PERS, GWPORS, or ~~Sheriffs' Retirement System~~ SRS who elects to ~~requalify~~ purchase previously refunded service in ~~his~~ their current system ~~shall have, as his first day of membership, be the first day of his requalified service~~ will increase their service credit but will not change first day of membership in their current retirement system. Therefore, their guaranteed annual benefit adjustment (GABA) eligibility date will not be affected.

(3) A member of ~~the police~~ MPORS or ~~Firefighters' Unified Retirement Systems~~ FURS ~~shall not have his first day of membership changed by any election to requalify previously refunded service~~ who elects to purchase previously refunded service in their current system will increase their service credit but will not change their first day of membership in their current retirement system. Therefore, the formula used for calculating their retirement benefit will not be affected.

(4) A retirement system ~~member of a retirement system will not affect his~~ member's first day of membership service ~~because of~~ will not change due to any voluntary election to transfer service ~~credits~~ credit into ~~this~~ that system from another system or to ~~qualify~~ the purchase of any other full-time public service employment or military service.

AUTH: ~~19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201,19-13-202,~~ 19-2-403, MCA

IMP: ~~Title 19, Ch. 3, part 4, part 5, Ch. 5, part 3, Ch. 6, part 3, Ch. 7,~~ ~~part 3, Ch. 8, part 3, Ch. 9, part 4, part 6, Ch. 13, part 3, part 4,~~ 19-2-303, 19-3-1605, 19-7-711, 19-8-1105, MCA

Statement of Reasonable Necessity: MPERA is changing "qualify" to "purchase" throughout our rules, similar to legislative changes in 2003. The term "qualify" could be confused with requirements that retirement systems being administered by MPERA must be "qualified" retirement plans. The term "purchase" better represents the process by which a member can increase the amount of their service credit.

Since GABA and retirement formulas are now based on hire date, MPERA believes it necessary to clarify that a member cannot change their date of hire through a service purchase. GABA must be based on actual service, not a service purchase. Service credit is a defined term that can mean one or multiple units of service credit. The term service "credits" is obsolete.

2.43.406 (2.43.2105) BASIC PERIOD OF SERVICE (1) The month is the basic period for the awarding of service credit and membership service for all retirement systems.

(a) Except as otherwise specified by rule or statute, 160 hours of service credit will equal one month of service credit, regardless of the calendar period during which the service credit was earned.

(b) Except as otherwise specified by rule or statute, 12 months of service credit will equal one year of service credit, regardless of the calendar period during which the service credit was earned.

(2) Service credit of less than 160 hours in a calendar month constitutes part-time service.

(3) If only compensation for full-time covered employment is used to calculate "final average compensation" or "highest average compensation" and if the member has both full- and part-time service, then the member must be granted proportional service credit for service in each calendar month of employment. The proportion will be equal to the number of documented hours for which compensation during a calendar month was reported for the employee, divided by 160 hours, but may not be greater than one.

(4) If only compensation for part-time covered employment is used to calculate "final average compensation" or "highest average compensation" and if the member has both full- and part-time service, then the member must be granted proportional service credit for service in each calendar month of employment. The proportion will be equal to the number of documented hours for which compensation during a calendar month was reported for the employee, divided by the average number of hours worked each month during the "final average compensation" or "highest average compensation" time period, but may not be greater than one.

(5) If compensation for both part-time and full-time covered employment is used to calculate the "final average compensation" or "highest average compensation", then the member must be granted proportional service credit for service in each calendar month of employment. The proportion will be equal to the number of documented hours for which compensation during a calendar month was reported for the employee, divided by the average number of hours worked each month during the "final average compensation" or "highest average compensation" period, but may not be greater than one.

(3) Upon retirement, MPERA will adjust the service credit for members who work less than full time. The total service earned during the period of the "highest average compensation" or "final average compensation" divided by three will define the service earned during the member's normal work year.

(a) The member must be granted proportional service credit for each fiscal year of employment on the basis of the member's normal work year.

(b) The proportion will be equal to the number of documented hours for which compensation during a calendar month was reported for the employee, divided by the average number of hours worked each month during the period of the "highest average compensation" or "final average compensation" times 12, but may not be greater than one.

AUTH: 19-2-403, MCA

IMP: 19-2-701, 19-3-904, 19-5-502, 19-6-502, 19-7-503, 19-8-603, 19-9-804, 19-13-704, MCA

STATEMENT OF REASONABLE NECESSITY: Current (3), (4), and (5) are difficult to understand and very repetitive. New (3) states the same concepts in much easier to understand language. The suggested change will enhance members' understanding of how their highest average compensation or final average compensation are impacted by working both part-time and full-time during their career.

2.43.407 (2.43.2106) NO DUPLICATION OF ~~CREDITS~~ SERVICE CREDIT (1) A member employed in ~~more than one covered job~~ multiple jobs covered by the same retirement system during any given month may not earn more than one month service credit in ~~a covered~~ that retirement system.

(2) ~~A member may not qualify the same period of military or public service employment in more than one retirement system.~~ A member employed in multiple jobs covered by different retirement systems will earn appropriate service credit in each system.

(3) A member may not requalify credit from another retirement system, or qualify any period of military or public service employment, for any calendar month for which full service credit has already been granted.

AUTH: ~~19-3-304, 19-6-201, 19-7-201, 19-8-201, 19-9-201, 19-13-202~~ 19-2-403, MCA

IMP: 19-2-703, 19-2-715, 19-3-508, 19-6-302, 19-7-307, 19-8-305, 19-9- 401, 19-13-401, MCA

STATEMENT OF REASONABLE NECESSITY: Sections (1) and (2) are proposed to be amended to clarify for staff and members alike that although a member cannot receive duplicate service credit for the same work, they can receive service credit in two different systems if they simultaneously work two or more positions covered by different retirement systems. Currently, this area is confusing to all.

The repealed sections have been moved to New Rule VII, which specifically addresses limitations on the purchase of military service.

2.43.408 (2.43.2109) ~~CALCULATION~~ RECEIPT OF SERVICE CREDIT ON OR AFTER TERMINATION OF EMPLOYMENT (1) A member terminating employment shall ~~not be granted~~ receive service credit for lump sum payments of severance pay or paid leave, including vacation, personal, sick, or compensatory leave, received in the month following termination of employment unless the member elects to retire effective that month.

~~(2) A member who receives compensation in a month after termination of employment may elect to receive appropriate service credit for that month.~~ No member can receive both service credit and a retirement benefit for the same month.

AUTH: 19-2-403, MCA

IMP: 19-3-108, 19-6-101, 19-7-101, 19-8-101, 19-9-104, 19-13-104, MCA

STATEMENT OF REASONABLE NECESSITY: Sections (1) and (2) currently duplicate each other in several respects. The proposed amendments eliminate the duplication and provide clarity. The board believes it better to express rule limitations in a positive rather than a negative manner. Various employers engage in different practices with respect to end of employment pay. "Paid leave" and "personal leave" are proposed to be added to the rule to cover any type of paid leave provided by the more than 500 employers who participate in a board-administered retirement system. Some of those employers have replaced sick and vacation leave with one type of leave, generally titled "personal leave."

2.43.410 (2.43.2302) ~~PROOF~~ DOCUMENTATION OF SERVICE (1) ~~When hours of employment are required for granting service credits, the board~~ MPERA ~~will utilize the~~ shall use employer certified records of employment to correct employer reports and to calculate ~~and grant~~ the cost of service ~~credits~~ credit granted to members.

(2) If~~, for any reason,~~ employer records are missing or alleged to be inaccurate, it shall be the member's responsibility to provide acceptable documentation to the board ~~which~~ that proves the amount of service ~~time~~ earned and salary paid to the member by the employer during the period in question.

(3) For the purposes of (2), the board will consider other documents, including but not limited to:

(a) pay stubs;

(b) copies of logs, time sheets, or other documents required to be kept by the employee for the employer;

(d) any other binding agreement or contract in effect at that time;

(e) certified copy of a court order or out-of-court settlement agreement;

(f) social security records;

(g) W-2s; or

(h) other notarized or official documents which would support the member's claim.

~~(3)~~ (4) If the board ~~grants~~ approves a ~~petition~~ request for correction of employer records or a request to purchase service, ~~additional~~ membership service and service ~~time~~ credit will be granted only after payment of required contributions, plus interest, into the retirement system ~~by the member~~.

AUTH: ~~19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201, 19-13-202,~~ 19-2-403, MCA

IMP: ~~Title 19, Ch. 3, part 3, Ch. 6, part 3, Ch. 7, part 3, Ch. 8, part 3, Ch. 9, part 4, Ch. 13, part 4,~~ 19-2-704, 19-3-315, 19-3-316, 19-5-402, 19-5-404, 19-6-402, 19-6-404, 19-7-403, 19-7-404, 19-8-502, 19-8-504, 19-9-703, 19-9-710, 19-13-601, 19-13-605, MCA

STATEMENT OF REASONABLE NECESSITY: Section (1) is proposed to be amended to clarify that this rule pertains to the correction of information reported by employers to MPERA. These errors are generally found several years after the service occurred, usually when members are ready to retire or wish to purchase retroactive service. Proposed changes to (2) delete the use of an undefined term, "service time" and remove an unnecessary clause. Section (3) is needed to update and clarify the "acceptable documentation" a member can use to substantiate missing service. Section (4) is amended to reflect current practice and terminology. Petitions are no longer required. Both membership service and service credit are now granted following full payment by either the employee or the employer, or a combination of both.

2.43.418 (2.43.3401) RETIREMENT OPTIONS FOR ELECTED OFFICIALS OTHER THAN LEGISLATORS (1) Any elected or appointed official, other than a legislator, who becomes a member of PERS pursuant to 19-3-412, MCA, will receive service credit based upon the number of the member's compensated hours. Per diem or other benefits are not compensation.

~~(2) Legislators may elect membership in PERS.~~

~~(a) The legislator's application to join or to decline PERS membership must be filed with the board within 180 days of the first day of the legislator's term of office.~~

(i) A senator who is subsequently elected to serve as a representative, or a representative who is subsequently elected to serve as a senator, is considered to have started a new term of office and has a new 180-day election period.

~~(ii) A senator or representative whose district changes as a result of redistricting is not considered to have started a new term of office and does not have a new 180-day election period.~~

~~(b) A legislator may also exercise options available under 5-2-304 and 19-3-412, MCA.~~

~~(c) A legislator who becomes a member of PERS must pay regular contributions on all compensation for service in office.~~

~~(i) The legislator must pay contributions through payroll deduction during a legislative session.~~

~~(ii) The legislator may pay contributions directly to MPERA when the Legislature is not in session.~~

(d) The total contribution required for the term will be based on the current statutory salary prescribed in 5-2-301, MCA, less any previous contributions. The legislator must make all payments to MPERA no later than the last day of the legislator's final term in that office.

~~(e) Service credit and membership service will be granted pursuant to 19-3-521, MCA.~~

~~(3)~~ (2) A retired PERS member who is elected or appointed to a state or local government public office covered by PERS may elect to become an active member of PERS or remain a retired member, with no limitation on the number of hours worked in the elected or appointed position.

~~(4)~~ (3) An active PERS member who is elected or appointed to a local government public office and works less than 960 hours a year in the elected position may decline membership in PERS with respect to the elected or appointed position.

~~(5) A member appointed to fill an unexpired term has the same rights and privileges as an elected official.~~

~~(6) An elected official whose term ends prior to the 15th of a month will be considered to have terminated covered employment effective the last day of the month preceding the end of the term.~~

~~(7)~~ (4) A PERS DBRP member who elects to purchase into PERS previous service as an elected or appointed official ~~in the PERS~~ must comply with 19-3-505, MCA, except the cost will not include interest for any contributions due on service prior to July 1, 1993.

AUTH: 19-2-403, MCA

IMP: 19-2-701, 19-2-702, 19-3-412, 19-3-1106, ~~19-5-301, 19-7-301,~~ MCA

STATEMENT OF REASONABLE NECESSITY: Section 19-3-412, MCA, recognizes that on occasion, for instance when an official resigns or dies while in office, elected officials may be appointed. Although current rule language also recognizes "appointed" elected officials in (5), the board prefers to use the term "appointed" within each section to better clarify that the rule applies to all elected officials, whether elected or appointed. This structure duplicates that in the statute. Section (6) is covered in statute. Statute should not be repeated in rule.

Section 5-2-304, MCA (2007), created significant differences between retirement options available to legislators and retirement options available to other elected officials. The board believes that separate rules addressing each group will result in better understanding of each group's retirement options. Therefore, (2) is proposed to be repealed.

2.43.420 (2.43.2317) ~~REQUALIFICATION~~ PURCHASE OF REFUNDED SERVICE OR SERVICE FROM ANOTHER MPERA-ADMINISTERED RETIREMENT SYSTEM (1) At any time prior to retirement, a member who is statutorily eligible to do so, may elect to ~~qualify~~ purchase into ~~his~~ their current retirement system all or any portion of ~~his~~ their previously refunded ~~credits~~ service in ~~his~~ ~~current~~ that system or service from another ~~state~~ MPERA-administered retirement system.

(2) ~~The foregoing~~ Section (1) shall not be construed to allow the ~~transfer or~~ purchase of ~~credits~~ service between two retirement systems while the individual is a member of both systems~~, nor shall it allow the transfer or purchase of service into a system by a former member of that system~~.

(3) In order to ~~qualify~~ purchase the previously refunded service, an eligible member must ~~initiate the action through~~ file a request to purchase service with MPERA identifying, in writing, the system to which he the member currently contributes~~, identifying, in writing, the system~~ and the period of employment which is to be ~~requalified~~ purchased.

(4) ~~The division will review~~ After reviewing the refund information in its files, ~~or submitted to it by the teachers' retirement system, and will~~ MPERA shall notify the member of the ~~exact~~ amount of ~~time which can be requalified~~ service eligible to be purchased and the ~~amount of employee contributions, plus interest, which must be deposited by the member in order to "buy back" the previously refunded~~ cost of that service ~~time~~.

(5) The member must have a letter of intent on file with the board for the buy back of previously refunded service credits, stating the amount of service credit to be requalified, the cost of the "buy back," and the amount of time over which the member will pay for such service.

(6) After full payment is made by the member, and if the service credit to be requalified was originally granted in a system other than the current system, the board will transfer from the previous system into the current system the actuarial equivalent of the employer's/state's share of granting such service credit in the current system.

AUTH: ~~19-3-304, 19-6-201, 19-7-201, 19-8-201, 19-9-201, 19-13-202~~ 19-2-403, MCA

IMP: ~~19-3-509, 19-3-511, 19-3-605, 19-6-305, 19-7-309, 19-8-306, 19-9-405, 19-9-603, 19-13-404~~ 19-2-704, 19-2-709, 19-2-710, 19-2-715, MCA

STATEMENT OF REASONABLE NECESSITY: The board is changing "qualify" to "purchase" throughout its rules, similar to legislative changes in 2003. The term "qualify" could be confused with requirements that board-administered retirement systems must be "qualified" retirement plans. The term "purchase" better represents the process by which a member can increase the amount of their service credit.

"Credits" is an obsolete term that has been replaced with "service". Section 19-2-715, MCA, permits a member to purchase service refunded from their current retirement system and any other MPERA-administered system, but not any retirement system in the state.

There is no longer a "division." It is now the Montana Public Employee Retirement Administration (MPERA). Sections (3) and (4) are rewritten to include proper terms and to better clarify the process required to purchase refunded service.

Sections (5) and (6) are proposed to be repealed as the subject matter is now addressed in New Rule V.

2.43.421 (2.43.2315) CREDIT FOR SERVICE IN THE UNIFORMED SERVICES (1) If an actively employed member of ~~the public employees', judges', highway patrol, sheriffs', game wardens' and peace officers', municipal police, or firefighters' unified retirement systems~~ 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 may receive service credit and membership service within the member's retirement system for that time, provided the member:

(a) remains a member of the retirement system during the period of service in the uniformed services by leaving his or her accumulated contributions on deposit;

(b) complies with the requirements of the Uniformed Services Employment and Reemployment Rights Act of 1994, commonly known as USERRA or the Montana Military Service Employment Rights Act (MMSERA);

(c) complies with all Code of Federal Regulations implementing USERRA or all administrative rules implementing MMSERA; and

~~(c)~~ (d) is reemployed pursuant to USERRA or MMSERA.

(2) The member must ~~make up~~ complete payment of the member's contributions for the uniformed services related absence within three times the period of the member's uniformed service, starting upon return to employment, but not to exceed five years.

(3) The member may ~~make up~~ pay the employee contributions:

(a) on a pretax basis pursuant to 19-2-704, MCA;

(b) in a lump sum, including a direct transfer from an eligible retirement plan or individual retirement account; or

(d) any combination of (3)(a), (b), and (c).

(4) If the member ~~makes up~~ pays the employee's contributions, the member's employer must ~~make up~~ pay the employer's contributions ~~within the same time frame~~. Employer contributions may be due from the member's local government employer and the state.

(5) The member's, ~~and~~ the employer's, and the state's contributions are determined based on the compensation the member would have received had the member not been called to uniformed services duty.

~~(6) Neither the member nor the employe~~r No interest is charged ~~interest~~ on their respective contributions.

~~(7)~~ (6) A member ~~who is~~ making ~~additional~~ contributions under a service purchase contract at the time he or she is called to service in the uniformed services ~~may suspend~~ will have their payments ~~under the contract~~ suspended by MPERA until return to employment as required under USERRA or MMSERA.

~~(8)~~ (7) For purposes of this rule, service in the uniformed services is any service covered by USERRA or by MMSERA, including:

(a) service in the Army, Navy, Marine Corps, Air Force, Coast Guard, or Public Health Service Commissioned Corps;

(b) service in the reserve components of each of the services listed in ~~(8)~~(7)(a); ~~and~~

(d) service in the Montana National Guard.

~~(9)~~ (8) For purposes of this rule, service includes:

(a) active duty;

(b) active duty for training;

(d) initial active duty training; and

(e) any period of time during which a member is absent from employment for the purpose of an examination to determine fitness to perform any of the above-listed duties.

(9) If the member dies while engaged in USERRA or MMSERA service, the balance of the service credit remaining to be purchased may be made from the member's estate, subject to the limitations of section 415 of the Internal Revenue Code.

(10) Regardless any provisions of state law to the contrary, the board will administer this rule in accordance with USERRA, and the federal department of labor regulations regarding USERRA.

AUTH: 19-3-403, MCA

IMP: 19-2-704, 19-2-707, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

The 2005 Legislature adopted the Montana Military Service Employment Rights Act (MMSERA) partly to provide USERRA-type rights to members of Montana's National Guard. Proposed amendments incorporate relevant provisions of the MMSERA for consistency purposes while recognizing that federal law controls when in conflict with state law.

Tax counsel has advised that relevant rules and regulations must be referenced, in addition to the USERRA and MMSERA statutes.

The term "make-up" is too general in nature and is proposed to be amended to clarify that contributions must be paid in order for the service to be purchased. Service purchase statutes permit an individual to use a combination of payment methods when purchasing any type of service, including USERRA and MMSERA related service. Depending on the retirement system involved, employer contributions include contributions from the employer, the state, and any local government employer.

The HEART Act (Heroes Earnings Assistance and Relief Tax Act of 2008) permits retirement systems to treat individuals who die or become disabled while performing qualified military service as if the individual resumed employment in accordance with USERRA on the day preceding death or disability, and terminated employment on the actual date of death or disability. Thus, MPERA has determined to permit service purchases of those individuals to be completed if so desired. The other proposed changes are for clarification purposes only and have no substantive impact on the rule.

2.43.422 (2.43.2308) MOST RECENT SERVICE PURCHASED FIRST

(1) When purchasing only a portion of a member's eligible military, federal volunteer, refunded, Montana public service, or other full-time public service, the member must first purchase the most recent service.

(2) A member who has refunded service more than once must purchase the most recent refund first.

~~(2)~~ (3) When purchasing or transferring a portion of a member's service credit from another retirement system, the member must first purchase the most recent service.

(4) When purchasing a portion of a member's retroactive service, the member must first purchase the most recent retroactive service.

AUTH: 19-2-403, MCA

IMP: 19-2-704, 19-2-715, 19-3-503, ~~19-3-504,~~ 19-3-505, ~~19-3-510,~~ 19-3-512, ~~19-3-513,~~ 19-3-515, ~~19-5-409,~~ 19-6-801, 19-6-803, ~~19-6-804,~~ ~~19-6-810,~~ 19-7-803, ~~19-7-804, 19-7-810,~~ 19-8-901, ~~19-8-903, 19-8-904,~~ ~~19-8-905,~~ 19-9-403, ~~19-9-411,~~ 19-13-403, ~~19-13-405,~~ MCA

STATEMENT OF REASONABLE NECESSITY: Section (1) is intended to apply to all service purchases for which the actuarial cost of the service is required. "Montana public service" purchases are based on actuarial cost and should be included in (1). Sections (2) and (4) are proposed to ensure this rule addresses all possible service purchases, with the most recent of each type of service being purchased first.

2.43.423 (2.43.2303) ~~PURCHASE OF OTHER TYPES OF SERVICE~~ DOCUMENTATION OF AMOUNT OF SERVICE ELIGIBLE TO BE PURCHASED (1) When military, U.S. government, federal volunteer, ~~full-time~~ Montana public employment, or other public employment related service is eligible to be purchased into a retirement system, the member is responsible for providing acceptable documentation to ~~the board~~ MPERA.

(2) The documents submitted by the member must be sufficient to prove to ~~the board~~ MPERA that the service is eligible to be purchased by the member.

(a) Documents used to prove military or federal volunteer service ~~shall~~ must include:

(i) military service records, including DD 214s, verified by the appropriate branch of service;

(ii) Peace Corps service records verified by the appropriate federal service agency; or

(iii) national service position records verified by the corporation for national and community service.

(b) Documents used to prove U.S. government, or Montana public employment, or other public employment ~~shall~~ must include employer certification of ~~the service and the compensation received~~:

(i) dates of employment, full- or part-time employment status, monthly hours of employment, compensation received, date and amount of refund, and current membership status; and

(ii) if the member was employed before the employer contracted to a public retirement system, the name of the public retirement system and the date the employer contracted to join that system, if applicable.

~~(i)~~ (c) If employer-certified salary and employment documentation is not available from the employer, or if the member contests the certified documents, the member may petition the board to purchase the service based upon acceptable documentation listed in ARM ~~2.43.428~~ 2.43.410.

~~(2)~~ (3) ~~The board~~ MPERA shall review the documents presented to determine whether the service qualifies to be purchased. If the service can be purchased, MPERA will then calculate the cost of the service.

~~(3) The MPERA will calculate the cost of purchasing military, federal volunteer service, or other full-time public service employment into the member's current system.~~

(4) The eligible member must have a letter of intent on file with the board to purchase all, or a specific portion of the service, into the member's account. The letter of intent must state whether payment for the service will be made in a lump sum or in installment payments. Installment payments will be subject to additional interest as determined by the board and computed over the payment period.

AUTH: 19-2-403, MCA

IMP: 19-2-715, 19-3-503, 19-3-505, 19-3-510, 19-3-512, 19-3-515, 19-6-801, 19-6-803, 19-7-803, 19-8-901, 19-8-903, 19-9-403, 19-13-403, MCA

STATEMENT OF REASONABLE NECESSITY: Section 19-2-715(1), MCA, permits the purchase of "all or any portion" of a member's service in another MPERA-administered retirement system while 19-2-715(2), MCA, permits the purchase of "all or a portion of service credit for full-time service performed for the state or a political subdivision of the state." Section (1) addresses both types of service. Both service purchases are based on actuarial value. Therefore, there is no need to limit the purchases to "full-time" service. The board proposes to repeal the "full-time" service requirement for consistency purposes. Due to the number of inquiries from members wishing to purchase private employment into a board-administered retirement system, the board proposes to also clarify that only service related to public employment can be purchased into a board-administered retirement system.

The inclusion of DD 214s as an acceptable military service record informs members of the type of military record needed by MPERA and encourages use of the same documentation by most members. Similarly, (2)(b) is proposed to be amended to inform members of the type of information required in order for MPERA to certify that their public employment is eligible to be purchased into their retirement system. The listing will also assist employers with providing the necessary information as easily as possible.

The internal reference to ARM 2.43.428 is proposed to be amended to ARM 2.43.410 as the board is proposing to combine ARM 2.43.428 with ARM 2.43.410 and to then repeal ARM 2.43.428. The "board" is replaced with reference to "MPERA" as MPERA is the board's staff and the entity that performs these functions.

Section (3) revises current (3) to provide that a cost statement will only be calculated if the service is eligible to be purchased. With that clarification, current (3) is no longer necessary. Section (4) is proposed to be repealed as it does not adequately address the service purchase process for either our members or for IRS qualification purposes. New Rule V addresses the written request to purchase service and the service purchase contract required prior to commencement of the purchase. The contract, as opposed to a mere letter of intent, should be required to establish the cost of the service and the payment method.

2.43.424 (2.43.2323) SERVICE CREDIT FOR PERIOD(S) OF ~~DISABILITY~~ ABSENCE DUE TO ILLNESS OR INJURY (1) A member of ~~the~~ PERS, HPORS, or GWPORS whose absence from service is compensated by workers' compensation, and who elects to leave ~~his~~ their accumulated contributions on deposit with the retirement system during that absence, may elect to ~~qualify~~ purchase up to five years of the period of absence for service credit~~s within 12 months of reinstatement to his position~~.

(2) In order to be eligible to qualify such a period of absence, a workers' compensation determination that the illness or injury was job-related must be made no later than one year after the member returns to his covered position.

~~(3) The member must file written application to qualify such service time with the board along with documentation of the period of time he was in receipt of workers' compensation benefits.~~

(4) The division will calculate the amount of contributions due based upon the amount the member would have normally received as salary had he not been absent from service using the member and employer contribution rates in effect during that period of time.

~~(5) Employee contributions, plus interest accruing from one year after the date the member returns to service, may be made in one lump sum or on an installment basis.~~

(6) The employer will be responsible for paying to the system the employer share of the contributions due, but may elect not to pay the accrued interest, if any, which is due, in which case the member must pay any interest due.

~~(7)~~ (2) No service credit will be granted to the member until the total contributions due are deposited into the system.

AUTH: ~~19-3-304~~ 19-2-403, MCA

IMP: 19-3-504, 19-6-810, 19-8-905, MCA

STATEMENT OF REASONABLE NECESSITY: "Disability" is a defined term used inappropriately in this context. A PERS, HPORS (as of 1999), and GWPORS (as of 1997) member absent from work due to an illness or injury intends to eventually return to work. Once the member returns to work, they can purchase service for the time during which they were absent. A person with a "disability" for board purposes cannot perform the work related to their position, will not usually be returning to work, and is eligible to take a disability retirement.

MPERA is changing "qualify" to "purchase" throughout our rules, similar to legislative changes in 2003. The term "qualify" could be confused with requirements that retirement systems being administered by MPERA must be "qualified" retirement plans. The term "purchase" better represents the process by which a member can increase the amount of their service credit.

Service credit is a defined term that can mean one or multiple units of service credit. The term service "credits" is obsolete.

Sections (2) through (6) are proposed to be deleted as the process for purchasing and paying for this service is outlined in statute and in New Rule V and New Rule VI.

2.43.426 (2.43.4807) PART-PAID FIREFIGHTERS' SERVICE (1) Service credits earned by part-paid firefighters prior to July 1, 1981, will be computed and granted on the basis of the ratio of salary earned by the part-paid firefighter to the salary paid to a newly confirmed full-paid firefighter during the same time period.

(2) Service credits earned on or after July 1, 1981, shall be granted under the assumption that all part-paid firefighters work 15% time. Employer and part-paid employee contributions to ~~the firefighters unified retirement system~~ FURS will be based on an assumed salary for part-paid firefighters which is 15% of a newly confirmed full-paid firefighter's salary for the same time period.

(3) A part-paid firefighter will accrue a service credit of one month for each calendar month during which contributions are made; however, if and when ~~such~~ the part-paid service is qualified into another system, or if ~~such~~ the part-paid firefighter also has full-paid firefighter service credits, each calendar month of part-paid service shall be credited as only .15 month of service.

AUTH: ~~19-13-202~~ 19-2-403, MCA

IMP: ~~Title 19, Ch. 13, part 4,~~ 19-13-301, MCA

STATEMENT OF REASONABLE NECESSITY: "Service credits" is an archaic term no longer used by MPERA or in retirement statutes. "Service credit" is defined in statute to include "periods of time for which the required contributions have been made to a retirement plan" and thus includes both singular and multiple units of service. The proposed change updates rule language and ensures consistency with statute.

Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading. MPERA prefers to not use the word "such" when "the" suffices.

2.43.432 (2.43.2318) ~~"1-FOR-5"~~ "ONE-FOR-FIVE" ADDITIONAL SERVICE (1) Subject to the requirements of each retirement system, a member with five or more years of membership service may purchase additional service credit. Members may purchase one full year of additional service for each five full years of membership service ~~credited~~ in the retirement system. A member eligible to purchase additional service may purchase ~~full~~ months of service totaling 11 months or less.

(2) The cost will equal the actuarial rate for the respective system times the member's compensation for the immediately preceding 12 months. Each full month of additional service will cost 1/12 the cost of a full year.

~~(3)~~ (2) The board will include a member's additional service when calculating the amount of a benefit, but not for ~~initial~~ determining early or service retirement eligibility ~~or for early retirement~~, except in the following cases:

(a) ~~PERS, which requires~~ additional service purchased into PERS is required to be included when ~~calculating the~~ determining a member's early retirement reduction factor; and

(b) ~~the sheriffs' retirement system, which requires~~ additional service purchased into SRS is required to be ~~credited for the purpose of meeting~~ used when determining a member's retirement eligibility.

~~(4)~~ (3) A retired member who returns to active ~~PERS~~ membership in the system from which they retired may purchase ~~additional~~ one-for-five service after at least 12 months of active service. The amount of ~~additional~~ one-for-five service which may be purchased will be based on the member's total membership service in ~~PERS~~ the member's current retirement system.

AUTH: 19-2-403, ~~19-3-304, 19-7-201~~, MCA

IMP: 19-3-513, 19-3-902, 19-3-904, 19-3-906, 19-5-409, 19-6-804, ~~19-7-311,~~ 19-7-804, 19-8-904, 19-9-411, 19-13-405, MCA

STATEMENT OF REASONABLE NECESSITY: The Gregg Reference Manual requires that numbers ten and under be written as words rather than as numerals. Section (2) is being repealed as the subject matter is addressed in New Rule VI.

Section (2) is proposed to be rewritten for clarification purposes only, with no substantive impact on the rule. Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading. Section (3) is amended to include all systems, not just PERS as a retiree of any MPERA-administered retirement system who returns to active employment covered by that retirement system can purchase one-for-five additional service. The term "additional" is replaced with "one-for-five" to avoid confusion with respect to which service can be purchased under this rule.

2.43.433 (2.43.2310) PURCHASE OF FULL-TIME SERVICE OR ONE-FOR-FIVE SERVICE BY PART-TIME MEMBERS (1) When a member employed on a part-time basis is eligible to purchase periods of full-time service or one-for-five service, the compensation used to calculate the cost to purchase ~~such~~ the full-time or one-for-five service will be the actual part-time compensation earned.

(2) If the member later retires with a full-time ~~FAS~~ final average compensation or highest average compensation, the member may either:

(a) have the amount of full-time service purchased under (1) ~~will be~~ proportionally reduced based upon the ~~proportion~~ ratio of time worked when the service was purchased. to full-time work; or

~~(3)~~ (b) ~~A member whose service is reduced under (2) above may elect to~~ ~~purchase service to equal full-time~~ retain the full-time service by paying the difference between the cost actually paid and the cost had the ~~member's salary~~ member been paid a full-time salary at the time of the purchase, plus 8% interest.

AUTH: ~~19-3-304, 19-6-201, 19-7-201, 19-8-201, 19-9-201, 19-13-202~~ 19-2-403, MCA

IMP: ~~Title 19, Ch. 3, 6, 7, 8, 9, 13~~ 19-2-704, 19-2-715, MCA

STATEMENT OF REASONABLE NECESSITY: One-for-five service is proposed to be added to this rule as it constitutes full-time service and is thus subject to the same requirements as full-time service. "FAS" is an obsolete term. It was the acronym for "final average salary," which has been replaced in statute with "final average compensation" or "highest average compensation," depending on the retirement system. The proposed amendments to (2) and (3) are for clarification purposes only and do not change the substantive nature of the rule.

2.43.437 (2.43.2316) RESERVE MILITARY SERVICE (1) Members who meet the requirements of their retirement systems may purchase active and reserve military service. The cost will equal the actuarial rate for the respective system times the member's compensation for the immediately preceding 12 months. Each full month of additional service will cost 1/12 the cost of a full year.

(2) Highway patrol officers who did not elect GABA will pay a different cost for military service, whether active or reserve. The cost will equal the contributions for the year of service the member must complete to purchase the year of military service. For example, a member purchasing the first year of military service would pay an amount equal to the contributions for the member's 16th year of service. To purchase the 2nd, 3rd, and 4th years, the member would pay an amount equal to the contributions for the 17th, 18th, and 19th years of service, respectively. The member must also pay interest forward from the date the member is eligible to purchase the service to when payment is complete. The interest is the rate set by the board for member accounts.

~~(3)~~ The following requirements pertain to the purchase of membership service and service credit for the member's reserve military service in the armed forces, including the Army National Guard and the Air National Guard:

(a) ~~The time spent in reserve military service must be confirmed on appropriate documentation from the proper branch of the armed forces.~~

~~(b)~~ The member may not purchase any more reserve military service for a one year period than the amount of reserve military service that, when combined with all other earned or purchased service for that one year period,

does not exceed one year of service credit. The reserve military service cannot be purchased if the member has received service credit for the same time period.

~~(c)~~ (b) The member may purchase reserve military service even if that period of service may be, or is, used to determine the member's right to, or amount of, military service retired pay under federal law, as provided by Title 10, chapter 1223 of the United States Code.

~~(d)~~ (c) The member may purchase reserve military time prior to separation from service in the reserves.

(2) The purchase of service pursuant to the Uniformed Services Employment and Reemployment Rights Act of 1994, commonly known as USERRA or the Montana Military Service Employment Rights Act is addressed in ARM 2.43.421.

AUTH: 19-2-403, MCA

IMP: 19-3-503, 19-5-410, 19-6-801, 19-7-803, 19-8-901, 19-9-403, 19-13-403, MCA

STATEMENT OF REASONABLE NECESSITY: Sections (1) and (2) are addressed in statute. Rules should not duplicate statute. Subsection (3)(a) is now covered in ARM 2.43.423. Section (2) is needed to ensure members wishing to purchase USERRA or MMSERA are directed to the correct information.

2.43.440 (2.43.2309) SERVICE PURCHASES BY INACTIVE VESTED MEMBERS (1) An inactive vested member may purchase any ~~additional~~ service for which the member is eligible any time prior to retirement. ~~The appropriate statutes and rules will be followed to calculate the cost to purchase the service except the~~

(2) The inactive vested member's ~~last~~ 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.

(a) The actuarial cost of the service purchase will be determined based on the member's age at the time of the purchase and the member's salary at the time of the member's most recent termination.

(b) Interest at an effective annual rate of 8% per year, compounded monthly, will be charged from ~~when~~ the ~~member last terminated~~ member's most recent termination date to when the member completes payment for the cost of the purchase.

(3) An inactive vested member who purchases service may not elect a retirement date prior to the date the service purchase is completed.

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

STATEMENT OF REASONABLE NECESSITY: Inactive vested members can purchase any available service for which they are eligible. "Additional service" is a defined term meaning "one-for-five" service. "One-for-five" service is the purchase of one year of additional service credit for each five years of membership service. "Additional" is proposed to be deleted to ensure that the rule applies to the purchase of any service (other than refunded service) and not just to "one-for-five" service. The purchase of refunded service by any member is specifically addressed in 19-2-603, MCA.

"Vested" is added to (2) because the entire rule applies only to inactive vested members, not inactive members in general. The term "most recent termination date" is more accurate than "last termination date" as the most recent may not ultimately be the member's last termination date. For example, if an inactive vested member returns to employment, their last termination date will occur in the future, after the purchase of the service credit.

Service purchased pursuant to this rule may have occurred in the distant past. Use of the member's most recent salary as opposed to a potentially much smaller salary will limit any potential adverse actuarial impact to the system resulting from the service purchase. Finally, although members can retire retroactively, the member must have completed all service purchases prior to retiring.

2.43.451 (2.43.2319) PURCHASE OF "ONE-FOR-FIVE" ~~ADDITIONAL~~ SERVICE BY EMPLOYERS FOR REDUCTION IN FORCE EMPLOYEES (1) Additional service purchased for members eligible for the retirement incentive program under 19-2-706, MCA, is limited to 3 years or restrictions otherwise in place in 19-3-513, MCA. The number of months of active duty military service or service from other public retirement systems purchased by a member after January 1, 1990, will reduce the amount of additional service for which the member is eligible to a combined total of no more than 60 months.

~~(2)~~ (1) Members ~~must~~ who are subject to a reduction in force and wish to apply for additional service under ~~the retirement incentive program~~ 19-2-706, MCA, must do so on forms provided by ~~the board~~ MPERA prior to ~~their voluntary~~ involuntary termination from covered employment ~~during the window period~~.

(3) Members involuntarily terminated must apply for additional service under the retirement incentive program on forms provided by the board on or after May 14, 1993, but prior to January 1, 1994. Members applying under 19-2-706, MCA, must apply after January 1, 1995, on forms provided by the board.

~~(4)~~ (2) ~~The board~~ MPERA will review the ~~applications~~ application and the member's file to determine the number of years of additional service ~~an employer may purchase for the member. The board will also determine the number of years of additional service which~~ a member is eligible to purchase ~~on their own behalf~~ and the required employer contributions for the purchase. ~~The board~~ MPERA may request any additional information it deems necessary from the employer or the member to complete this review.

~~(5)~~ (3) After review, ~~the board~~ MPERA will send the application to the employer to certify the following data:

(a) termination date;

(b) reason for termination (voluntary, reduction in force, or other);

(d) whether the position was eliminated or reclassified.

~~(6)~~ (4) After receiving ~~certification~~ the requested certified information, ~~the board~~ MPERA will formally review and approve the request, if appropriate.

~~(7)~~ (5) ~~The board will base the~~ The cost of the one-for-five service will be based on the member's final 12 months of ~~service~~ salary, ending with the last full month of service. When calculating the cost for a member working part-time but whose final average ~~salary~~ compensation or highest average compensation will be based on full-time service, the final 12-month salary will be proportionally adjusted. ~~The cost for purchasing the service will be billed to the member's former employer after approval of the application~~ ~~and the additional service will be utilized when computing the member's retirement benefit.~~

~~(8)~~ (6) A cost statement ~~to purchase the additional service will be sent to the~~ for the employer's portion of the cost of the one-for-five service will be sent to the member's former employer after the member terminates. The employer may pay the amount in full within one month of billing, or may select an installment plan of no more than ten years duration. ~~Under an installment plan, the maximum period is 10 years, and employers~~ Installment plans will include interest at an effective annual rate of 8%, compounded monthly.

(7) Employers who chose the installment plan option ~~may~~ must make annual ~~or monthly~~ payments no later than June of each year. ~~Installment plans will include interest at an effective annual rate of 8%, compounded monthly. The board~~

(a) MPERA will provide early payoff or pay down figures at the request of ~~employers~~ an employer.

(b) If the employer prepays on the installment plan, MPERA will recalculate the interest due following each payment, based on the remaining balance due. Prepayments will not relieve the employer of the obligation to make the next installment payment unless the amount owing is paid in full.

(8) The member will be billed for his or her portion of the cost of the one-for-five service.

AUTH: 19-2-403, ~~19-3-908,~~ MCA

IMP: 19-2-706, ~~19-3-908,~~ MCA

STATEMENT OF REASONABLE NECESSITY: Sections (1) and (3) are proposed to be repealed for multiple reasons. The retirement incentive program expired many years ago. The three year restriction mentioned in (1) is adequately addressed in statute. Statute should not be repeated in rule. The remainder of (3) is proposed to be repealed as the process for purchasing service is now addressed in New Rule V.

Section (1) is amended to address the reduction in force program identified in 19-2-706, MCA, and to repeal reference to the expired retirement incentive program, which is under 19-3-908, MCA. The reduction in force program is for involuntarily terminated individuals while the retirement incentive program was for those who voluntarily terminated.

MPERA is the administrative arm of the board and is the actual entity that provides forms and makes initial determinations regarding eligibility to purchase any type of service and the cost of that service. Section (2) recognizes that the member's file must be reviewed in order to ascertain the amount of service for which the member is eligible, and the cost to the employer of that service. Similarly, (4) recognizes that it may not always be appropriate for MPERA to approve the service purchase request. There would be no need for review if MPERA could not reject a service purchase request.

Section (5) recognizes that cost is based on salary, not on service. The term "additional" service is replaced with "one-for-five" service to avoid confusion and to clarify that this rule applies to one-for-five service only. The term "final average salary" has been replaced in statute with "final average compensation" or "highest average compensation." The last sentence is proposed to be repealed as the subject matter is addressed more accurately in (6).

Section (6) recognizes that the employer bears the primary cost of the one-for-five service. The employee contributes to the cost only if the employee chooses to purchase more service than that purchased with the employer's contribution as permitted in (8). The remaining changes to (6) and (7) limit installment plan payments to yearly. Currently, employers do not make consistent payments, choosing instead to send in contributions as money becomes available. A set process is needed for better administration of the purchasing process, and to assist in determining the amount, including interest, remaining due from the employer.

2.43.452 (2.43.2609) RETURN TO EMPLOYMENT WITHIN SAME JURISDICTION (1) A PERS, GWPORS, SRS, FURS, or HPORS member who receives additional service under 19-2-706 ~~or 19-3-908~~, MCA, may again be employed within the same jurisdiction~~. However,~~ provided the member ~~may only~~ does not work for ~~less~~ more than 960 hours in a calendar year in any position covered by ~~the public employees'~~ a retirement system administered by MPERA ~~or 600 hours in a position covered by another Title 19, MCA, retirement system during any calendar year~~.

(a) A retired member must terminate employment and receive at least one monthly retirement benefit before returning to active service.

(b) An inactive member may return to active service within the same jurisdiction after a five-day break in service.

(2) A retired member who ~~receives the incentive, and~~ returns to employment under (1) ~~within the same jurisdiction,~~ must notify the board ~~within one week of employment~~ and ensure a working retiree report is filed with MPERA on a monthly basis. Service performed under ~~an independent~~ a contract that fails the tests set out in ARM 2.43.302 is employment subject to the ~~600-hour or the~~ 960-hour limitation and reporting requirements.

~~(3) Employers must report to the board the following information:~~

~~(a) a member who took advantage of the provisions of 19-2-706 or 19-3-908, MCA, and who returns to work within the same jurisdiction;~~

~~(b) current hours worked and amounts paid to the member; and~~

~~(c) each member's active service or employment after retirement with an independent contractor or as an independent contractor.~~

~~(4)~~ (3) When a member who has returned to work under (1) exceeds ~~works for~~ 960 ~~or more~~ hours in a calendar year ~~position covered by the public employees' retirement system or for 600 or more hours for another Title 19, MCA, retirement system, for the same jurisdiction~~, the member forfeits the additional service received. ~~The~~ Pursuant to 19-2-706, MCA, the board will ~~give employers a~~ credit ~~for~~ the ~~amount~~ member's employer with the employer's ~~they paid~~ contribution for the additional service ~~minus~~ that exceeds the total retirement benefits paid to the member from retirement to forfeiture.

(a) If the employer paid the contributions owed MPERA in a lump sum, the employer will be credited with the difference between contributions paid and benefits received;

(b) If the employer is paying the contributions owed MPERA on an installment contract and the total retirement benefits received by the member:

(i) do not exceed the amount that has been paid on the installment contract, the employer will be credited ~~amount due will be~~ with the difference between contributions paid and benefits received ~~the total benefits paid from retirement to forfeiture.~~;

(ii) exceed the amount that has been paid on the installment contract but not the total amount due on the installment contract, the employer will be required to continue paying on the installment contract until the amount paid equals the retirement benefits received. Any outstanding balance due on the installment contract will continue to be charged ~~The board will charge~~ interest at ~~an effective annual rate of 8%~~ the actuarially-assumed rate of interest, compounded monthly~~, for any outstanding balance~~.

(c) If the total benefits received by the member exceed the total contributions owed by the employer, no adjustment will be made to the employer's contributions.

AUTH: 19-2-403, ~~19-3-908,~~ MCA

IMP: 19-2-706, ~~19-3-908,~~ MCA

STATEMENT OF REASONABLE NECESSITY: Section 19-3-908, MCA references a retirement incentive program that has expired.

The 600 hour limitation for a PERS, GWPORS, SRS, FURS, or HPORS working retiree who returns to a position covered by another retirement system was changed to 960 hours effective July 1, 2005. The limitation applies only to positions covered by another "retirement system." "Retirement system" is defined at 19-2-303(39), MCA as one of the retirement systems enumerated in 19-2-302, MCA. Current rule extends the limitation to "another Title 19, MCA, retirement system" which includes the Teachers' Retirement System and the Montana University System's Optional Retirement Program. Since neither of those systems is enumerated in 19-3-302, MCA, language is proposed that clarifies that the limitation applies only to MPERA-administered retirement systems.

A working retiree's and the working retiree's employer are required to report to MPERA on a monthly basis. The employer's report, if signed by the working retiree, meets both requirements. There is no reason to request additional notification from the working retiree.

ARM 2.43.302 sets out the criteria for determining whether a contract establishes an independent contractor or employee relationship. The contractor may be independent, but the contract itself is just a contract.

The process set out in (3) is addressed in ARM 2.43.506 and need not be repeated here.

Section (4) is revised to reference rather than repeat (1) for clarity purposes and to address the statutory changes mentioned above. The remaining new language in (4) is needed to address the amount of employer contributions that MPERA must retain and the amount returned to the employer if a member returns to employment in a position covered by an MPERA-administered retirement system. Statute does not address the amount of contributions to be credited to the employer if the employer makes payments under an installment contract.

2.43.502 (2.43.2602) APPLICATION PROCESS FOR DISABILITY BENEFITS (1) ~~Except as submitted by board members or the MPERA staff acting in those capacities, a request for the determination of disability benefit rights must be initiated in writing~~ ~~utilizing appropriate forms, and must be accompanied by all relevant information available to the requesting party.~~

(a) The requesting party may provide additional information for consideration until 10 days (20 days for medical information which must be reviewed by a medical doctor) prior to the next scheduled board meeting, or, if different, the board meeting at which the request will be considered.

~~(b) The board or MPERA may require the requesting party to provide specific information prior to board determination.~~

~~(2)~~ All forms necessary to apply for disability benefits may be obtained from ~~the~~ MPERA.

~~(3)~~ (2) ~~All~~ The following forms must be completed and submitted to ~~the~~ MPERA before the board will act on the application for disability benefits~~. A completed application must include the following forms~~:

(a) application for disability retirement and summary of disability;

(b) job duty questionnaire for disability retirement completed by the employer;

(d) authorization to release information.; and

(e) a Health Insurance Portability and Accountability Act (HIPAA) authorization.

(3) The requesting party may provide additional medical information for consideration until 21 days prior to the next scheduled board meeting or, if different, the board meeting at which the request will be considered.

(4) The employer of the disability benefit applicant must define the essential elements of the member's position and show reasonable accommodation was attempted for the member's disabling condition(s) in compliance with the Americans with Disabilities Act (ADA), statutes and rules.

(5) "Total inability" for purposes of determining disability means the member is unable to perform the essential elements of the member's job duties even with reasonable accommodation required by the ADA.

~~(6) The factors the board will consider in determining total inability and the permanence of a disability will include, but are not limited to:~~

~~(a) availability and use of sick leave;~~

~~(b) vocational rehabilitation;~~

~~(c) medical treatment; and~~

~~(d) whether employment has been terminated.~~

AUTH: 19-2-403, 19-3-2104, 19-3-2141, MCA

IMP: 19-2-406, 19-3-1002, 19-3-1005, 19-3-2141, 19-5-601, 19-6-601, 19-7-601, 19-8-701, 19-9-902, 19-13-802, MCA

STATEMENT OF REASONABLE NECESSITY: Section (1) is proposed to be deleted as the information is not in chronological order with respect to the remaining sections, is too wordy, and contains dated information regarding timeframes for providing medical information. The information in (1)(a) has been updated and moved to (3). The 21 day requirement is consistent with the time frame in ARM 2.43.203(5)(a) and allows sufficient time for the board's contracted physician to review the information and provide an opinion based on that information.

Section (2) is rewritten to eliminate duplicate language and to clarify and update the information required by a member applying for a disability retirement. There has been confusion in the past regarding who should complete the job duty questionnaire. Completion by the employer as opposed to the employee helps ensure that the information provided is comprehensive and accurate.

Section (6) is proposed to be deleted as these factors have little to do with the definition of a disability, particularly in light of the Family Medical Leave Act and the Americans with Disabilities Act. Factors to be considered when determining disability are broad in nature, but specific with respect to individual members. A listing of factors to be considered runs the risk of being less than comprehensive in some instances and totally irrelevant in others.

2.43.503 (2.43.2601) APPLICATION PROCESS FOR SERVICE RETIREMENT (1) In order to receive the first retirement benefit in a timely manner, prospective retirees must request an estimate of retirement benefits no less than 30 days prior to a member's anticipated retirement date.

(2) The request must include the retiring member's:

(a) full name;

(b) social security number;

(d) date of birth;

(e) name, social security number, and date of birth of beneficiary, if any;

(f) ~~beneficiary's~~ name, social security number, and date of birth of contingent annuitant(s), if any;

~~(g) beneficiary's date of birth;~~ and

~~(h)~~ (g) anticipated date of retirement.

(3) ~~The division~~ Upon request, MPERA will ~~compute~~ calculate retirement benefit estimates ~~of retirement benefits~~ for the eligible retiring member (and ~~his~~ their ~~beneficiary~~ contingent annuitant(s) under any options which are statutorily available ~~to members of some systems)~~ and will mail those estimates along with complete retirement information and an application for service retirement to the member.

(4) Based on the retirement estimates and information provided by ~~the division~~ MPERA, the member ~~must~~ may elect ~~a regular, early, or optional retirement~~ whether to retire and if so, the statutorily-allowed retirement option the member prefers ~~(if eligible) and~~. A member wishing to retire must return ~~the~~ a signed retirement application ~~to the board~~ to MPERA, along with certified copies of ~~his and his beneficiary's~~ the member's and the member's contingent annuitant's birth certificates or other acceptable proof of age, before benefits will be paid.

(5) The option factors used in the calculation of the option 2 or option 3 retirement benefit pursuant to ARM 2.43.304 will be based on the nearest whole ages of the member and contingent annuitant.

(6) Retirement applications must be received by the 14th of any month in order for the initial retirement benefit to be paid that month.

AUTH: ~~19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201, 19-~~ ~~13-202,~~ 19-2-403, MCA

IMP: ~~Title 19, Ch. 3, part 9, part 11, Ch. 5, part 5, part 7, Ch. 6, part 5,~~ ~~Ch. 7, part 5, part 7, Ch. 8, part 6, part 8, Ch. 9, part 8, Ch. 13,~~ ~~part 7~~ 19-2-403, 19-2-801, 19-3-1210, 19-3-1501, 19-5-701, 19-5-802, 19-6-903, 19-7-503, 19-7-1001, 19-8-801, 19-8-1002, 19-9-1102, 19-13-903, MCA

STATEMENT OF REASONABLE NECESSITY: Subsections (2)(e), (f), and (g) are reordered to list information required for both beneficiaries and contingent annuitants. The rule currently appears to address both under the term "beneficiaries," which is confusing at best. A member who selects a straight life annuity (option 1) must name at least one beneficiary to receive any remaining accumulated contributions upon the member's death. A member who elects a joint and survivor annuity (options 2 and 3) or an annuity for a period certain (option 4) must name at least one contingent annuitant to receive the continuing benefit following the member's death. Social security numbers and dates of birth help MPERA find the beneficiary/contingent annuitant if no current address exists and assist in ensuring the correct identity of that individual.

Sections (3) and (4) are proposed to be amended for several reasons. There is no longer a Public Employees' Retirement Division (PERD or division). It is now the Montana Public Employee Retirement Administration (MPERA). And, as mentioned in the preceding paragraph, a member who elects an annuity as their benefit option must name a contingent annuitant, not a beneficiary. In (4), "must" is changed to "may" and the sentence rewritten as members may elect to take a lump-sum withdrawal of their accumulated contributions rather than an ongoing monthly retirement benefit. "Certified" copies of birth certificates are required by ARM 2.43.504 as part of MPERA's ongoing efforts to eliminate fraud wherever possible. This rule should be consistent with ARM 2.43.504. The remaining changes are for clarification only and have no substantive impact on the rule.

New (5) and (6) document long-time MPERA practices for the benefit of retirement system members and to ensure MPERA has the authority to continue these practices. Use of anything other than the member's nearest whole age would result in endless actuarial tables providing no significant differences. Applications received after the 14th of the month cannot be verified and entered into the "computer" in time to permit receipt of a retirement benefit for that month.

2.43.504 (2.43.2603) ACCEPTABLE PROOF OF DATE OF BIRTH (1) A certified copy of a birth certificate or state birth registration shall be proof of the date of birth for the purpose of completing an application for retirement benefits.

(2) If a birth certificate or state birth registration is not available, the board will accept a driver's license and one of the following~~, in order of preference,~~ as proof of date of birth:

(a) baptismal record;

(b) selective service record;

(d) passport;

(e) school record;

(f) ~~life insurance policy~~ tribal identification or registration;

(g) naturalization record;

(h) alien registration record; or

(i) ~~such~~ other records ~~as may be~~ submitted by the member which are acceptable to ~~the board~~ MPERA.

(3) If the birth certificate is in a language other than English, MPERA may request one of the alternative means of identification listed in (2).

AUTH: ~~19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201,19-13-202~~ 19-2-403, MCA

IMP: ~~Title 19, Ch. 3, parts 9 and 11, Ch. 5, parts 5 and 7, Ch. 6, part 5, Ch.~~ ~~7, parts 5 and 7, Ch. 8, parts 6 and 8, Ch. 9, part 8, Ch. 13, part 7~~ 19-2-403, MCA

STATEMENT OF REASONABLE NECESSITY: A Montana driver's license is recognized nationally as a secure form of identification, perhaps even better than a passport. However, not all members or contingent annuitants possess a Montana driver's license. The board believes that presentation of a driver's license along with one other recognized form of identification to be adequate proof of a member or contingent annuitant's identity and date of birth.

The board does not believe life insurance policies have adequate safeguards to ensure age and identity and therefore proposes to repeal that option. Tribal governments have very stringent identification and registration requirements. Many tribal members use their registration as their primary form of identification. It provides adequate reassurance of both identity and date of birth.

MPERA has received numerous foreign birth certificates. If the certificate is not in English, MPERA may need to request additional proof of identity.

As the board's administrative arm, MPERA is the entity that accepts identification records for retirement purposes.

2.43.505 (2.43.3403) INVOLUNTARY RETIREMENT (1) An elected official, who is a member of either the judges' or sheriffs' retirement systems due to the elected office he holds, is eligible for an involuntary retirement allowance only when he runs for and loses an election which would have continued him in a covered office, provided the requisite number of years of total service have been performed.

~~(2)~~ If an elected official, including a legislator, chooses not to run, runs for another office ~~which~~ that is not covered by that retirement system, or is otherwise removed from office for cause, he that official shall not be eligible for an involuntary retirement allowance.

(3) A member of the sheriffs' retirement system who does not hold elected office is eligible for an involuntary retirement allowance only upon termination from active duty due to a reduction in force.

AUTH: ~~19-5-201, 19-7-201~~ 19-2-403, MCA

IMP: ~~19-5-503, 19-7-504~~ 19-2-706, MCA

STATEMENT OF REASONABLE NECESSITY: Judges' Retirement System statutes specifically address involuntary retirement. The SRS statute was repealed in 1997. Therefore, sections (1) and (3) are no longer necessary. The rule need address only elected officials who are members of PERS.

2.43.506 (2.43.2608) RETURN TO COVERED EMPLOYMENT BY PERS, SRS, OR FURS RETIREE � REPORT (1) A An employer who employs a retired PERS member ~~who is employed, after retirement,~~ in a position covered by ~~the~~ PERS or in "employment covered by the retirement system" as specified in 19-3-1106, MCA, must ~~be reported~~ submit a certification report to ~~the~~ MPERA ~~on a monthly basis~~ for each payroll period during which a retired PERS member is employed. This ~~reporting~~ certification requirement does not apply to a PERS retiree who is elected to a state or local public office and chooses to not become an active member of PERS.

(2) A An employer who employs a retired ~~sheriffs' retirement system (SRS)~~ SRS member ~~who is employed, after retirement,~~ in a position covered by ~~the~~ SRS must ~~be reported~~ submit a certification report to ~~the~~ MPERA ~~on a monthly basis~~ for each payroll period during which a retired SRS member is employed.

(3) An employer who employs a retired FURS member in a position covered by FURS must submit a certification report to MPERA for each payroll period during which a retired FURS member is employed. ~~The MPERA must receive the report by the 15thof the month following the month for which employment is being reported.~~

(4) The certification report must include the following information for each individual referred to in (1) through (3):

(a) ~~working retiree's~~ name and social security number;

(b) ~~month and year~~ pay period being reported;

(d) the daily and total number of regular, overtime, holiday, sick leave, and vacation or annual leave hours worked for the employer; ~~and~~

(e) gross compensation received from the employer; and

(f) the employer's verification that the employer provided the working retiree with the information submitted to MPERA.

(5) The ~~report must be signed by both the~~ employer ~~and the working retiree~~ must submit the certification report by filing it with MPERA no later than ten working days after each regularly occurring payday.

(6) A separate certification report must be filed with MPERA for each ~~employment~~ position held by the working retiree.

AUTH: 19-2-403, MCA

IMP: 19-3-1104, 19-3-1106, 19-7-1101, 19-13-301, MCA

STATEMENT OF REASONABLE NECESSITY: Working retirees are of great concern to the board. As baby boomers reach retirement age and available workers decrease, more retirees will either volunteer or be asked to return to assist their previous employer. When working retirees return to employment, whether as employees, leased employees, or through private personnel services companies, they take positions from "new" employees who would be contributing to the retirement system. This reduction in contributions will have a negative actuarial impact on the retirement systems if allowed to go unchecked.

Proposed amendments to (1) address 19-3-1106(6), MCA (2007), that added the duty to report working retirees who perform work through professional employer arrangements, leasing arrangements, and temporary service contractors. Proposed (3) addresses 19-13-301, MCA (2007) that caps working FURS retirees at 480 hours. Strict compliance with these statutes is required to minimize the actuarial impact of working retirees. Therefore, all retirees must be reported to MPERA to assist MPERA in tracking the number of hours worked and identifying when the member must either temporarily lose their retirement benefit or be returned to active employment.

All sections are proposed to be amended to address new requirements associated with MPERA's electronic and web reporting processes. Changes include information reported and certified by the employer and the timing of the reports. Reporting by payroll period rather than monthly will ensure MPERA has the most up-to-date information to better track hours worked by working retirees.

Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading. The remaining proposed changes are for clarification purposes only and have no substantive impact on the rule.

2.43.508 (2.43.2701) PERIODIC MEDICAL REVIEW OF DISABILITY BENEFIT RECIPIENTS (1) The medical status of each member receiving a disability benefit will be reviewed annually by the board to determine whether the member continues to be disabled, unless:

(a) the board determines reviews are unnecessary and may be discontinued;

(b) the board determines more frequent reviews are warranted by the nature of the disability;

(c) the board converts the disability retirement benefit of a participant in the defined benefit retirement plan to a service retirement benefit; or

(d) a participant in the defined contribution retirement plan receiving a disability benefit reaches 60 65 years of age.

AUTH: 19-2-403, 19-3-2104, 19-3-2141, MCA

IMP: 19-2-408, 19-3-1015, 19-3-2141, 19-5-612, 19-6-612, 19-7-612, 19-8-712, 19-9-904, 19-13-804, MCA

STATEMENT OF REASONABLE NECESSITY: The Age Discrimination in Employment Act requires that a defined contribution member receive a disability benefit until age 65. The proposed amendment reflects this requirement and is consistent with 19-3-2141, MCA.

2.43.509 (2.43.2702) PERIODIC MEDICAL REVIEW OF DISABILITY BENEFIT RECIPIENTS -- INITIAL NOTICE TO MEMBER (1) ~~The~~ MPERA will send written notification of medical review to a member receiving a disability benefit which is subject to review. The notice will be sent to the member at the most recent address provided and will inform the member of:

(a) the date by which medical information and records must be ~~received~~ filed; and

(b) any specific medical tests or diagnosis required for the review.

(2) The member will be required to have the results of a current medical examination, including any specifically required tests or diagnosis, ~~submitted~~ filed directly ~~to the~~ with MPERA by the examining medical authority(ies) within 60 calendar days of initial notification. The medical examination must be performed by the member's treating physician or other competent medical authority. To be considered current, the date of a medical examination must be no earlier than six months prior to ~~receipt~~ the date filed with ~~by the~~ MPERA.

(3) ~~Disabled retirees of~~ ~~the highway patrol officers', sheriffs', game wardens' and peace officers', municipal police officers' and firefighters' unified retirement systems~~ Members receiving a disability benefit who are required by MPERA or the board to obtain tests pursuant to (2) will be reimbursed for travel necessary to obtain the ~~required~~ MPERA-required examinations or tests provided current medical examinations or tests are not otherwise available. Reimbursement for lodging, meals, and mileage will be at the rates established for state employees in Title 2, chapter 18, MCA. ~~The actual cost of lodging will be reimbursed up to a maximum of $40 per day.~~

AUTH: 19-2-403, 19-3-2104, 19-3-2141, MCA

IMP: 19-3-1015, 19-3-2141, 19-5-612, 19-6-612, 19-7-612, 19-8-712, 19-9-904, 19-13-804, MCA

STATEMENT OF REASONABLE NECESSITY: The terms "received," "submitted," and "receipt" should be replaced with the term "filed" as the medical tests and diagnosis must be filed with MPERA by a certain date. Thus, the term "filed" as defined in ARM 2.43.301 is applicable to this situation. Minor rewrites were required in order to be grammatically correct.

Currently PERS and JRS members are not reimbursed for travel expenses associated with board- or MPERA-required medical examinations. The board has determined there is no logical reason to not reimburse the member of any board-administered retirement system for those expenses. Lodging has been reimbursed at a maximum of $40 per day for many years. This amount is insufficient. Rather than change the rule to keep up with costs, the board believes reimbursement at the state's lodging rate is a logical alternative.

2.43.510 (2.43.2703) ~~INITIAL AGENCY~~ PERIODIC REVIEW OF MEDICAL EVIDENCE -- NOTICE OF ADDITIONAL EVIDENCE REQUIRED (1) The board's medical consultant and disability claims examiner will review all medical records previously submitted and those requested for the current period and submit interpretations and recommendations as to the current disability status of the member.

(2) If ~~the~~ MPERA determines the records submitted by the member's treating physician in response to the initial notice of review are not current or are otherwise inadequate to complete a review, ~~the~~ MPERA will send written notice to the member of the specific ~~additional~~ examinations, diagnoses, or tests necessary for adequate review of the disabling condition. When appropriate, the type of medical authority to conduct the necessary tests or examination will be specified or a particular physician may be appointed to conduct the required examinations or tests.

(3) The member will be allowed 60 days from the date of notification to complete the required examinations or tests and have the results sent directly to ~~the~~ MPERA by the examining physician.

(4) If the member chooses not to provide additional medical evidence administratively determined as necessary, the previous medical evidence ~~submitted~~ filed will be presented to the board along with staff recommendations regarding continuing disability of the member.

AUTH: 19-2-403, 19-3-2104, 19-3-2141, MCA

IMP: 19-3-1015, 19-3-2141, 19-5-612, 19-6-612, 19-7-612, 19-8-712, 19-9-904, 19-13-804, MCA

STATEMENT OF REASONABLE NECESSITY: MPERA recently contracted with a new doctor to conduct reviews of disability claims. That doctor would like to have a diagnosis included with the member's medical examination. The board believes the treating physician's diagnosis will be helpful to both the board and its doctor when reviewing disability claims. "Additional" is deleted because the information sought may be the first examination.

The term "submitted" should be replaced with the term "filed" as the report must be filed with MPERA by a certain date. Thus, the term "filed" as defined in ARM 2.43.301 is applicable to this situation.

2.43.511 (2.43.2704) FAILURE TO RESPOND -- SECOND NOTICE (1) A member who fails to ~~submit~~ file all medical information as required in the notice will be sent a "second notice" by certified mail, return receipt requested. The second notice will inform the member of:

(a) any specific medical tests ~~or diagnosis~~ and diagnoses required by the board for the review; and

(b) the date on which disability benefits will be suspended if the member does not provide the medical evidence.

(2) The member may request an extension to accommodate scheduled appointments. The written request justifying the need for additional time must be ~~received by the~~ filed with MPERA at least 15 days prior to the end of the time period. Any requests for extensions in excess of 30 days will not be approved.

AUTH: 19-2-403, 19-3-2104, 19-3-2141, MCA

IMP: 19-3-1015, 19-3-2141, 19-5-612, 19-6-612, 19-7-612, 19-8-712,

19-9-904, 19-13-804, MCA

statement of reasonable necessity: The term "submit" should be replaced with the term "file" as the report must be filed with MPERA by a certain date. Thus, the term "filed" as defined in ARM 2.43.301 is applicable to this situation. "Diagnosis" is proposed to be amended to recognize that some disabled members may have more than one diagnosis.

2.43.514 (2.43.2707) CANCELLATION OF DISABILITY BENEFITS DUE TO CHANGE OF MEDICAL STATUS (1) If the board determines the medical information available, including that provided by the member, does not demonstrate continuing disability, the monthly disability benefit will be cancelled.

(2) The effective date of cancellation for members of ~~public employees', judges'~~ PERS and JRS and elected officials of ~~the sheriffs' retirement systems~~ SRS will be the first day of the second month following board action. For example, ~~(e.g.~~ board action on January 28 to cancel disability benefits ~~on January 28,~~ would result in cancellation of the March benefit).

(3) Except in the case of a member of ~~the judges' retirement system~~ JRS or an elected official ~~of the public employees' and sheriffs' retirement systems~~ in PERS or SRS, the member's former employer will be notified of the member's eligibility for reinstatement to service.

AUTH: 19-2-403, 19-3-2104, 19-3-2141, MCA

IMP: 19-3-1015, 19-3-2141, 19-5-612, 19-6-612, 19-7-612, 19-8-712,

19-9-904, 19-13-804, MCA

STATEMENT OF REASONABLE NECESSITY: The example provided is written incorrectly. The board action, not the cancellation, would occur on January 28.

Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

2.43.515 (2.43.2711) APPEAL OF CANCELLATION OF BENEFITS (1) A member may appeal the cancellation of disability benefits only by requesting an administrative hearing (contested case) in writing within 30 days of the date of written notice of cancellation ~~after the effective date of the cancellation~~.

AUTH:19-2-403, 19-3-2104, 19-3-2141, MCA;

IMP: 19-3-1015, 19-3-2141, 19-5-612, 19-6-612, 19-7-612, 19-8-712,

19-9-904, 19-13-804, MCA

STATEMENT OF REASONABLE NECESSITY: The effective date of the cancellation varies from system to system and employer to employer. Therefore, it is difficult for the member, MPERA, and the board to know when the 30 day appeal time commences. ARM 2.43.203 uses the date of written notification to start the appeal time. The board believes this to be a workable solution that will give consistency to its processes. Please note that if the board unilaterally converts a disabled member's disability to a service retirement benefit under 19-3-1015, MCA, that statute provides the member 60 days to appeal.

2.43.603 (2.43.2901) REFUNDS TO MEMBERS (1) Any contributing member ~~whose service has been discontinued~~ who has terminated employment for any reason other than death or retirement, may elect to withdraw ~~his~~ their accumulated contributions provided:

(a) he the member makes written request on the most recent application provided by ~~the PERD,~~ MPERA; ~~and~~

(b) ~~all~~ the refund ~~applications must be~~ application is completed by both the ~~employee~~ member and the employer, ~~notarized,~~ and forwarded to ~~the PERD~~ MPERA by the employer~~, and~~;

(c) the contribution and service credit from the report on which the member last appears is credited to ~~his~~ the member's account~~, and~~;

(d) the employer's report indicates the member has terminated;

~~(d)~~ (e) the member is will not ~~returning~~ return to covered employment for at least 30 days; and

(f) the member does not have an established agreement for reemployment in a position covered by the retirement system providing the refund.

(2) Correctly completed and submitted refund applications will be processed within three weeks after the member's final contributions are credited to ~~his~~ the member's account, including termination payments of sick and annual leave.

(3) ~~The employer portion of the refund application need not be completed if~~ An alternative refund form is available from MPERA for the member who has terminated and whose member's account has been inactive for more than three months.

(4) ~~Additional contributions will be refunded no more than once each 6 months or upon termination.~~

~~(5) Request for additional contribution refund must include the notarized signature of the member, but the employer portion need not be completed.~~

~~(6) Refunds of total additional contributions must include accrued interest.~~

~~(7)~~ No partial refunds of normal contributions ~~or accumulated contributions~~ will be made.

~~(8) Refund of employer contributions will not be made except where it can be documented, to the division's satisfaction, that an error has been made in the employer contribution paid.~~

AUTH: ~~19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201,~~

~~19-13-202~~ 19-2-403, MCA

IMP: 19-2-303, 19-2-602 ~~19-3-703~~, 19-5-403, 19-6-403, ~~19-7-304,~~

~~19-8-503, 19-9-304, 19-9-602, 19-13-602~~, MCA

STATEMENT OF REASONABLE NECESSITY: Section (1) pertains to a retirement system member who has quit their job but not yet terminated membership in the retirement system. Therefore, under 19-2-303, MCA, the correct language is "terminated employment." Refund applications include a "Special Tax Notice" whose contents change to comply with federal law. Use of the most recent application will ensure the refunding member is aware of the most recent tax implications associated with the refund. The board has determined to no longer require a notarized signature as the notarization was used to merely document the signature, not to verify the truth of anything asserted on the refund application. There is no longer a Public Employees' Retirement Division (PERD or division). It is now the Montana Public Employee Retirement Administration (MPERA).

Subsections (1)(d) and (f) are added and subsection (e) is amended to address specific termination requirements that will ensure the board's retirement plans remain qualified under the internal revenue code. According to IRS rules and regulations, a member with an agreement to return to work has not terminated employment and is not eligible to receive a retirement benefit.

Section (3) is proposed to be amended because the board now provides a separate refund application for those members who terminated employment more than three months prior to applying for a refund. A separate form is easier for the member to understand and reduces the risk of error.

Sections (4) through (6), (8), and part of (7) are no longer applicable as the board has not accepted "additional contributions" from members for many years. The other proposed changes are for clarification purposes only and have no substantive impact on the rule.

2.43.604 (2.43.2902) DEATH PAYMENTS, SURVIVOR BENEFITS, AND OPTIONAL RETIREMENT BENEFITS (1) Upon the death of a an active or inactive member, the member's designated beneficiary, or statutory beneficiary~~, or contingent annuitant~~ must submit a ~~certificate of~~ certified copy of the member's death certificate and a completed ~~MPERA~~ death claim form to ~~the~~ MPERA.

(2) Upon the death of a retired member receiving an option 1 benefit, the member's designated beneficiary, or personal representative if no designated beneficiary, must submit a certified copy of the member's death certificate. Completed death claim forms may be required if there are multiple designated beneficiaries or a lump sum payment remains.

(3) Upon the death of a retired member receiving an option 2, 3, or 4 benefit, a contingent annuitant must submit a certified copy of the member's death certificate to MPERA.

~~(2)~~ (4) If ~~the~~ all designated or statutory ~~beneficiary predeceases~~ beneficiaries predecease the member, the member's ~~estate~~ personal representative or next of kin as defined in 19-2-802, MCA, must ~~file~~ submit the required documents ~~required in (1)~~.

~~(3)~~ (5) If ~~the~~ all designated or statutory ~~beneficiary renounces~~ beneficiaries renounce their interest in their payment rights, a contingent beneficiary or other identified payment recipient may submit the required documents ~~required in (1)~~.

~~(4)~~ (6) Upon receipt of the required documents ~~required in (1)~~, MPERA ~~staff~~ will advise the beneficiary or contingent annuitant of the benefits available.

~~(5)~~ (7) ~~Death claim forms are available at the~~ Contact MPERA ~~office~~ to obtain a death claim form.

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

STATEMENT OF REASONABLE NECESSITY: Previously this rule lumped active, inactive, and retired members together. However, active and inactive members do not have a contingent annuitant as a contingent annuitant is named by a retiree to receive the "survivor" portion of the member's joint and survivor annuity (options 2, 3, and 4). Members who elect option 4 may name more than one contingent annuitant. Active members and retirees who elect a single life annuity (option 1) may have one or more designated beneficiaries (or statutory beneficiaries if the member is in a public safety retirement system).

The board has determined to accept only certified copies of birth and death certificates to lessen the possibility of fraud.

Section (4) is proposed to be amended to recognize that the "estate" cannot file documents. However, the member's personal representative can do so on behalf of the estate. The term "submitted" should be replaced with the term "filed" as the report must be filed with MPERA by a certain date. Thus, the term "filed" as defined in ARM 2.43.301 is applicable to this situation.

The other proposed changes are for clarification purposes only and have no substantive impact on the rule.

2.43.607 (2.43.2903) PAYMENT TO AN ESTATE (1) Payment due to an estate will be made upon receipt of a certified copy of ~~one of the following:~~

~~(a)~~ a personal representative's letters testamentary or letters of administration. MPERA will also make a payment to an estate upon receipt of certified documentation recognized in Title 72, MCA, as proof that payment to an estate should be made. ~~which are issued to a person named personal representative of an estate;~~

~~(b) an order admitting a will to probate as evidence of title;~~

~~(c) an affidavit filed with the county court under the Small Estates Provisions of the Uniform Probate Code, Title 72; or~~

~~(d) a judgment to declare heirship under the provisions of the Uniform Probate Code, Title 72.~~

AUTH: ~~19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201,~~ ~~19-13-202~~ 19-2-403, MCA

IMP: ~~19-3-1302, Title 19, Ch. 5, part 6, Ch. 6, part 6, Ch. 7, part 6, Ch.8,~~ ~~part 7~~ 19-2-802, ~~19-9-912~~ 19-9-1102, 19-13-903, MCA

STATEMENT OF REASONABLE NECESSITY: Title 72, MCA, contains many different methods to show proof that payment should be made to an estate. The board believes it best to list the most common, then to defer to Title 72, MCA, rather than attempt to create a list of methods that may not be inclusive of all methods recognized in Title 72, MCA, or that may provide methods that are not permitted in Title 72, MCA.

2.43.611 (2.43.4603) MUNICIPAL POLICE OFFICERS' ~~SUPPLEMENTAL BENEFITS AND ALLOWANCE ADJUSTMENTS~~ MINIMUM BENEFIT ADJUSTMENTS (1) When a city belonging to ~~the municipal police officers' retirement system~~ MPORS has not negotiated a salary agreement with ~~their~~ its actively employed police officers by July 1 of any year, the following actions will be taken by ~~the public employees' retirement division~~ MPERA:

(a) ~~Supplemental benefits and allowance adjustments~~ Retirement benefits will be paid to non-GABA retirees from that city which will be calculated using the base salary of a newly confirmed police officer of that city during the most recently reported fiscal year for which there was a negotiated salary agreement in effect. using the most recent base salary for a newly confirmed police officer negotiated by the city and reported to MPERA.

(b) By August 1 a report will be sent to the state auditor stating the supplemental benefits payable from the appropriate insurance premium tax funds based upon information available from cities as of that date.

~~(c) As~~ When a salary ~~agreements are~~ is negotiated by ~~cities~~ the city and ~~the retirement division~~ MPERA is notified of ~~changes~~ a change in base pay for the city's newly confirmed police officers, ~~supplemental~~ retirement benefits will be recalculated and adjustments paid retroactively to ~~retired members~~ non-GABA retirees from ~~those cities~~ that city.

~~(d)~~ (c) Updated reports will be sent to the state auditor certifying the ~~additional~~ increased ~~supplemental~~ retirement benefits payable from insurance premium tax funds during a given fiscal year as those ~~additional~~ amounts become known.

AUTH: 19-2-403 ~~19-9-201~~, MCA

IMP: 19-9-1007, ~~19-9-1011,~~ MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

There is no longer a Public Employees' Retirement Division (PERD or division). It is now the Montana Public Employee Retirement Administration (MPERA). Part of the current rule is written in the singular "city" and part in the plural "cities". MPERA proposes to use the singular case throughout the rule for consistency and clarity purposes.

The retirement benefit to which this rule applies is for members of MPORS who became active prior to July 1, 1997 and did not choose to participate in the guaranteed annual benefit adjustment (GABA) provided for in 19-9-1009 and 19-9-1010, MCA. Those individuals receive a retirement benefit increase based on the salary paid by their last employer to newly confirmed police officers. Prior to GABA, this increase was known as a supplemental benefit or benefit allowance adjustment. Once GABA was enacted, this method of calculating a member's benefit increase became an alternate adjustment to the member's retirement benefit. Proposed language recognizes this change and results in a rule consistent with current statute.

Subsection (1)(b) is proposed to be repealed as it mirrors statute and is not necessary.

2.43.617 (2.43.2607) PAYMENT OF ESTIMATED BENEFITS (1) ~~The division~~ MPERA shall pay estimated retirement benefits to qualified members for up to three months. To qualify for estimated retirement benefits, a member must ~~file~~ submit an application for early or normal service retirement, terminate active service, and meet retirement age and membership service requirements.

(2) ~~The division~~ MPERA shall pay estimated disability retirement benefits for up to three months to members granted disability retirement status by the board.

(3) ~~The division~~ MPERA shall obtain from the employer all documentation necessary to determine the member's total service credit and final compensation and calculate the amount of the member's retirement benefit. The member's retirement application shall be submitted to the board for approval at the next meeting after ~~the division~~ MPERA finalizes the benefit amount.

(4) Estimated retirement benefits will be suspended after three months if the member's retirement application has not been finalized by ~~the division~~ MPERA and approved by the board. Monthly benefit payments to the member will not resume until after the board approves the retirement application. The first payment following board approval will include any previously suspended payments and retroactive amounts owed the member.

(a) If more than 225 retirement applications are received for members wishing to retire on a specific date, estimated retirement benefits for those retirees may be paid for up to five months prior to suspension under (4).

(5) Once a member has received and accepted a retirement benefit, the member is no longer entitled to a refund of the member's accumulated contributions.

AUTH: 19-2-403, MCA

IMP: 19-2-403, 19-2-502, 19-2-901, MCA

STATEMENT OF REASONABLE NECESSITY: There is no longer a Public Employees' Retirement Division (PERD or division). It is now the Montana Public Employee Retirement Administration (MPERA). Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading. As baby boomers begin to retire, MPERA's workload will increase. The board believes it necessary to increase the three month limit for final approval of a retiree's benefits if the workload becomes too great. Continuation of the three month time frame in those circumstances will lead to increased errors and increased employee costs (overtime).

New section (5) is added to make clear to retiring members that once they retire, and accept a retirement benefit, they can no longer change their mind and receive a refund of their accumulated contributions. The board has recently received refund requests from retired members who face an unexpected financial emergency. This proposed language ensures that everyone understands that the refund option and the retirement option are mutually exclusive.

2.43.801 (2.43.5001) BASIC UNIT OF SERVICE ~~TIME~~ (1) As of July 1, 1965, the basic unit of service ~~time~~ for volunteer firefighters is one fiscal year. Volunteer firefighters not continuously on the active membership list of a single qualifying volunteer fire company for the entire fiscal year shall not be listed on the annual certificate and shall not receive credit for service under the Volunteer Firefighters' Compensation Act (VFCA) for that fiscal year. A volunteer fire company qualifies to participate in the VFCA if the requirements of 19-17-402, MCA, are met.

(2) A volunteer firefighter shall receive one year of credit for service under the ~~Volunteer Firefighters' Compensation Act~~ VFCA for each two full fiscal years of service performed prior to July 1, 1965.

AUTH: 19-17-203, MCA

IMP: 19-17-201, 19-17-401, 19-17-402, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading. The term "qualifying volunteer fire company" is vague and requires further explanation.

2.43.802 (2.43.5002) FAILURE TO FILE REQUIRED REPORTS (1) In order to receive credit for service under the ~~Volunteer Firefighters' Compensation Act~~ VFCA, volunteer fire ~~departments~~ companies must ~~submit~~ file an "annual certificate" ~~to the~~ with MPERA. The certification is a report by the fire chief that the members listed on the certificate were active for the full fiscal year and also had the required 30 hours of training. This report is on a fiscal year basis (July through June) and is due by September 1 of each year. The annual certificate is signed by the fire chief and notarized. Annual certificate forms are provided by ~~the~~ MPERA.

(2) Annual certificates filed after the September 1 due date must be appealed to and considered by the board for approval. Information provided to the board by the fire chief or designated official ~~to the board~~ must include:

(a) the original, notarized annual certificate;

(b) certified training documents showing the required 30 hours of training per listed member;

(d) if requested by the fire chief, oral argument before board.

AUTH: 19-17-203, MCA

IMP: 19-17-108, 19-17-201, 19-17-402, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

"Volunteer fire departments" is proposed to be change to "volunteer fire companies" to comply with changes made to 19-17-102(9), MCA, by the 2007 Montana Legislature. The term "companies" is defined to encompass fire departments, fire companies, fire districts, and fire service areas.

The term "submitted" is proposed to be replaced with the term "filed" as the report must be filed with MPERA by a certain date. Thus, the term "filed" as defined in ARM 2.43.301 is applicable to this situation. Many fire chiefs designate administrative personnel to file the required certificates and other reports. MPERA will accept filings from either the chief or the chief's designee.

2.43.803 (2.43.5006) APPLICATION FOR GROUP INSURANCE PREMIUM PAYMENTS (1) Each volunteer fire company, or organization or agency maintaining supplemental insurance for a fire company, is eligible for payments toward supplemental insurance coverage for ~~their~~ active members of the fire company provided the company ~~submits~~ files by December 31 of each year:

(a) an a completed MPERA-provided application form ~~(as provided by the MPERA)~~;

(b) a copy of the ~~department's~~ fire company's active membership list certified by the county clerk as required by 7-33-2311, MCA; and

AUTH: 19-17-203, MCA

IMP: 19-17-103, 19-17-201, MCA

STATEMENT OF REASONABLE NECESSITY: Frequently, MPERA is asked to send payments directly to the county or other governmental entity carrying supplemental insurance for the volunteer fire company. Therefore, MPERA is proposing to amend this rule to allow the payments to go to either the volunteer fire company or the entity providing the supplemental insurance.

The term "department" is proposed to be changed to "fire company" to comply with changes made to 19-17-102(9), MCA, by the 2007 Montana Legislature. The term "company" is now defined to encompass fire departments, fire companies, fire districts, and fire service areas. The term "submitted" should be replaced with the term "filed" as the requested information must be filed with MPERA by a certain date, December 31st of each year. Thus, the term "filed" as defined in ARM 2.43.301 is applicable to this situation.

The rule is further clarified to indicate that the application provided by MPERA must be completed prior to being filed.

2.43.804 (2.43.5007) PAYMENTS TO SERVICE PROVIDERS FOR MEDICAL EXPENSES RESULTING FROM DUTY-RELATED INJURIES AND ILLNESSES (1) Payments for medical expense claims made pursuant to Title 19, chapter 17, part 5, MCA, ~~shall~~ will be ~~ordered~~ paid directly to medical service providers after:

(a) the claim is properly filed as described in 19-17-502, MCA; and

(b) all personal and/or group insurance payments for those services first have been deducted from the claim.

(2) Medical expense claims in excess of $1,000 must be approved by the board prior to payment by MPERA.

(3) Subsequent insurance settlements in payment of medical expenses which have been previously paid by the board shall be reimbursed to the pension fund within 60 days of receipt by member or service provider.

AUTH: 19-17-203, MCA

IMP: ~~19-17-103, 19-17-201,~~ 19-17-504, 19-17-506, MCA

STATEMENT OF REASONABLE NECESSITY: Statute provides that the board will authorize payment of medical expenses upon compliance with various requirements. The term "ordered" is too strong and denotes the need to obtain a court order when none is required.

2.43.905 (2.43.2205) TREATING SALARY DEFERRALS UNDER A CAFETERIA PLAN AS COMPENSATION � BACKGROUND (1) Pretax deductions allowed by state and federal law are included in compensation as that term is defined in the following statutes:

(a) 19-3-108, MCA ~~(public employees' retirement system)~~ (PERS);

(b) 19-5-101, MCA ~~(judges' retirement system)~~ (JRS);

(d) 19-7-101, MCA ~~(sheriffs' retirement system)~~ (SRS);

(e) 19-8-101, MCA ~~(game wardens' and peace officers' retirement system)~~ (GWPORS);

(f) 19-9-104, MCA ~~(municipal police officers' retirement system)~~ (MPORS); and

(g) 19-13-104, MCA ~~(firefighters' unified retirement system)~~ (FURS).

(2) Under federal law, pretax deductions that may be included in the definition of compensation include elective contributions under an IRC section 125 cafeteria plan, but only to the extent the amounts would be includible in gross income but for IRC section 125(a). See IRC section 415.

(3) The board is required to administer PERS, JRS, HPORS, SRS, GWPORS, MPORS, and FURS in a manner required to satisfy the applicable qualification requirements for a qualified governmental plan, as provided in the IRC. Therefore, the board adopts this subchapter to ensure that only elective contributions that would be includible in gross income but for the fact they were made under a bona fide cafeteria plan under IRC section 125 will be included as compensation for purposes of PERS, JRS, HPORS, SRS, GWPORS, MPORS, and FURS.

AUTH: 19-2-403, MCA

IMP: 19-2-1001, 19-2-1005, 19-2-1010, 19-3-108, 19-5-101, 19-6-101,

19-7-101, 19-8-101, 19-9-104, 19-13-104, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

2.43.914 (2.43.2214) IMPLEMENTATION AND COMPLIANCE (1) A participating employer must demonstrate compliance with this subchapter as follows:

(a) The employer must submit to the board a copy of the employer's IRC section 125 plan document and the salary reduction or election form that must be completed by the employees wishing to participate.

(b) The salary reduction or election form must be the document that will be used for the enrollment period that precedes the next IRC section 125 plan year.

(c) The open enrollment period must be specifically identified in the material provided to the participating employer's employees and in the material provided to the board.

~~(c)~~ (d) Once compliance has been demonstrated, the employer must verify on an annual basis that its IRC section 125 plan document and election form have not changed. If either document does change, the new document or election form must be submitted to the board.

(2) If an employer fails to provide the IRC section 125 plan document, the salary reduction or election form in a format that complies with this subchapter, or fails to use the salary reduction or election form during the enrollment period, then compensation for that employer shall not include the IRC section 125 plan's salary reduction amount.

(3) Board policy number BOARD Admin 03 titled "Treating Salary Deferrals Under a Cafeteria Plan as Compensation" contains several examples of both valid and invalid cafeteria plans, elections, and waivers and should be referenced for further guidance.

AUTH: 19-2-403, MCA

IMP: 19-2-1001, 19-2-1005, 19-2-1010, 19-3-108, 19-5-101, 19-6-101, 19-7-101, 19-8-101, 19-9-104, 19-13-104, MCA

STATEMENT OF REASONABLE NECESSITY: MPERA has conducted audits of 125 plans that do not specify the plan's open enrollment period. In order to be a valid 125 plan for IRS purposes, the enrollment window must be identified. The board believes it prudent to include this requirement in its rules to support MPERA's efforts to ensure full compliance with section 125 of the IRC for employers that intend to include 125 plan benefits as compensation for retirement purposes.

2.43.1002 (2.43.3502) ADOPTION OF INVESTMENT POLICY STATEMENT AND STABLE VALUE FUND INVESTMENT GUIDELINES (1) The board adopts and incorporates by reference the State of Montana 401(a) Defined Contribution Plan Investment Policy Statement approved by the board on ~~February 8, 2007~~ January 10, 2008.

(2) The board adopts and incorporates by reference the State of Montana 401(a) Plan Full Discretion Guidelines for the Stable Value Investment Option approved by the board on February 22, 2001.

(3) Copies of the Investment Policy Statement and Full Discretion Guidelines may be obtained from ~~the~~ MPERA, 100 North Park Avenue, Suite 200, P.O. Box 200131, Helena, MT 59620-0131, phone 1(877)275-7372, e-mail mpera@mt.gov. The documents are also available on-line at mpera@mt.gov.

AUTH: 19-3-2104, MCA

IMP: 19-3-2104, 19-3-2122, MCA

STATEMENT OF REASONABLE NECESSITY: The Employee Investment Advisory Council (EIAC), with the assistance of the plan's investment consultant, reviews the defined contribution retirement plan's investment options and compares the options to the plan's investment policy statement (IPS). The IPS establishes the requirements and criteria for the investment options within the plan, as well as the requirements and criteria to be followed when changing investment options. The IPS must be reviewed by the board annually.

The board reviewed the IPS at its January 10, 2008 meeting. The board expressed its preference to remain as consistent as possible with respect to the terms of the IPS. The board then determined to correct a grammatical error in the first sentence of the paragraph immediately following the definitions contained in Section 3 of the IPS and to recognize that the Association for Investment Management and Research changed its name to the CFA Institute. Those changes have been made to the IPS, which must now be adopted by reference through the amendment of this rule.

2.43.1003 (2.43.3503) DEFINED CONTRIBUTION RETIREMENT PLAN INVESTMENT OPTIONS (1) The board will choose, regularly review, and may discontinue, add, or change investment options offered to participants of the ~~Defined Contribution Retirement Plan (DCRP)~~ DCRP. In doing so, the board will consider recommendations of the statutorily established Employee Investment Advisory Council and follow criteria established in the Investment Policy Statement.

(2) A DCRP participant with assets in a discontinued investment option will be given notice and 90 days to move assets from the investment option being discontinued to an offered investment option. Assets remaining in a discontinued investment option at the end of the 90-day period will be automatically transferred to the investment option similar in investment category and style selected by the board to replace the discontinued investment option. If the discontinued investment option is not replaced, the board will transfer the fund balance to the default balanced fund.

(3) ~~No notice will be provided~~ DCRP participants will be provided a minimum of 30 days notice if the board replaces or changes the ~~Stable Value Investment Option Manager~~ stable value investment option manager. The ~~Stable Value Investment~~ stable value investment option assets will automatically transfer to the new manager(s).

AUTH: 19-2-403, 19-3-2104, MCA

IMP: 19-3-2104, 19-3-2122, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

The board need only consider recommendations made by EIAC but must follow the criteria established in the IPS.

The same request for proposals process is used for selecting mangers of the stable value investment option as is used for changing managers of other fund classes. The board sees no reason to not inform DCRP participants when the stable value investment option manager is set to change. Public notice should be encouraged. The Gregg Reference Manual, relied on by the Secretary of State's Office, does not permit capitalization of titles such as those used in this rule.

2.43.1004 (2.43.3504) DEFINED CONTRIBUTION RETIREMENT PLAN DEFAULT INVESTMENT FUND (1) The board will identify a balanced fund to be the default investment fund.

(2) The following assets will be deposited in the default investment fund:

(a) assets initially transferred from the PERS ~~Defined Benefit Retirement Plan (DBRP)~~ DBRP pursuant to ARM 2.43.1030 on behalf of ~~Defined Contribution Retirement Plan (DCRP)~~ DCRP participants;

(b) assets transferred from a discontinued, but not replaced, investment option pursuant to ARM 2.43.1003(2); and

(3) These assets will remain in the default investment fund until the DCRP participant files valid investment directions and redirects assets from the default investment fund to the selected investment option(s).

AUTH: 19-2-403, 19-3-2104, MCA

IMP: 19-3-2114, 19-3-2115, 19-3-2117, 19-3-2122, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

2.43.1010 (2.43.3510) ELECTION PERIOD (1) Active PERS members ~~generally~~ have 12 ~~calendar~~ months to complete the retirement plan choice election form provided by the board and file the election ~~form~~ with ~~the~~ MPERA. The 12-month election period starts the first day of the month following the month the member is initially reported to MPERA.

~~(2) Specific categories of PERS members and their election periods are:~~

~~(a) A PERS member who is active both on and before July 1, 2002 must file an election by June 30, 2003.~~

(b) Any PERS member, including seasonal, temporary, or part-time employees, who is active both on and before July 1, 2002 and subsequently becomes inactive any time before June 30, 2003, mustfile an election by June 30, 2003. Members will not have a new election period by virtue of returning to active employment at a later date.

~~(c) A PERS member newly hired or rehired on or after July 1, 2002 must file an election within 12 calendar months from the initial date of hire or rehire as reported by the reporting agency.~~

~~(d)~~ (2) Any newly hired PERS member ~~newly hired or rehired on or after July 1, 2002~~, including seasonal, temporary, or part-time employees, who subsequently becomes inactive, must still file an election within their 12- ~~calendar~~ ~~months from the~~ ~~initial date of hire or rehire~~ month election period. Members will not have a new election period by virtue of returning to active employment at a later date.

~~(e)~~ (3) The 12-month election period for any ~~Any~~ PERS member ~~whose membership~~ who has not been properly reported to ~~the~~ MPERA will ~~have 12 calendar months from the date~~ start the first day of the month following the month the member is properly reported ~~to file an election~~.

(a) An election to transfer to the PERS ~~Defined Contribution Retirement Plan~~ DCRP or the Montana University System Optional Retirement ~~program~~ Program will be effective upon confirmation by ~~the~~ MPERA pursuant to ARM 2.43.1012 and will not be retroactive.

~~(f)~~ (4) ~~Employees~~ The 12-month election period for employees of any municipal corporation, county, or public agency ~~in the state~~ which becomes a contracting employer with ~~the~~ PERS as provided under 19-3-201, MCA will ~~have 12 calendar months from~~ start the first day of the ~~date the new contracting employer's resolution is signed and approved by the board to file an election~~ month following the month the contracting employer initially reports the employee to MPERA.

AUTH: 19-2-403, 19-3-2104, MCA

IMP: 19-3-2104, 19-3-2111, MCA

STATEMENT OF REASONABLE NECESSITY: When the defined contribution retirement plan was initially adopted, implementing rules were required to address current PERS members who had one year to elect whether to participate in the DCRP or the DBRP. Those rules are no longer necessary as the one year window has expired. Subsections (2)(a) through (c) pertain only to the initial election window and are no longer relevant. MPERA proposes to repeal those subsections to avoid confusion and to reword other subsections to address the current election window.

Statute requires a 12-month election window. Initially, statute required the 12 months to commence upon the member's hire date. However, MPERA does not know the member's hire date. MPERA does not know of the member's existence until the employer reports the member to MPERA. Therefore, statute was amended in 2007 to commence the 12-month window at the time the member is reported to MPERA. The proposed amendments implement this same change and are needed to ensure consistency with statute.

2.43.1011 (2.43.3511) RETIREMENT PLAN CHOICE ELECTION FORM

(1) ~~The board~~ MPERA shall provide PERS members a retirement plan choice election form which will require the following information:

(a) full name (first, last, middle initial);

(b) social security number;

(d) complete address;

(e) employing agency or agencies;

(f) the member's signature indicating the elected retirement plan or program; and

(g) the date the member signed the election form.

(2) The PERS member shall complete and file the election form directly with ~~the~~ MPERA within the timeframes defined in ARM 2.43.1010. Election forms given to employers or any other party are not considered to be filed with ~~the~~ MPERA.

(3) The PERS member's election is irrevocable once the election form is filed with ~~the~~ MPERA.

(4) The effective date of the election will be the date the member's election is confirmed by ~~the~~ MPERA pursuant to ARM 2.43.1012.

AUTH: 19-2-403, 19-3-2104, MCA

IMP: 19-3-2111, MCA

STATEMENT OF REASONABLE NECESSITY: MPERA, as the administrative arm of the Public Employees' Retirement Board, is the actual entity that provides forms to members of the retirement systems administered by MPERA and the board.

"The" is not needed before "MPERA" and is being deleted throughout the rules to save space and promote ease of reading.

2.43.1012 (2.43.3512) ELECTION ELIGIBILITY AND CONFIRMATION

(1) Upon receipt of a retirement plan choice election form, ~~the~~ MPERA will verify that the member is eligible to make the election.

(2) The member is eligible to make an election if all the following conditions are met:

(a) the member was an active PERS member on or after July 1, 2002, with a PERS membership card on file with MPERA;

(b) the member made the election within the timeframes defined in ARM 2.43.1010;

(c) the member ~~does not have an incomplete PERS Defined Benefit Retirement Plan (DBRP)~~ has completed any existing PERS or non-PERS service purchase contract pursuant to ARM 2.43.1015; and

(d) the member is not subject to a PERS DBRP Family Law Order.

(3) ~~The~~ MPERA will confirm the PERS member's eligibility and election within five working days of receipt of the election form.

(4) The effective date of the election will be the date it is confirmed by ~~the~~ MPERA.

AUTH: 19-2-403, 19-3-2104, MCA

IMP: 19-3-2104, 19-3-2111, 19-3-2112, 19-3-2115, MCA

STATEMENT OF REASONABLE NECESSITY: PERS membership is confirmed through the existence of a valid PERS membership card. A membership card also contains beneficiary information that is essential to the proper administration of PERS. A membership card that provides this critical information is therefore necessary before a PERS member can move from the defined benefit to the defined contribution retirement plan.

At the time the DCRP was created, existing PERS members had one year to elect whether to participate in the DBRP or the DCRP. Many of those members had service purchase agreements. Service cannot be purchased by DCRP members. Therefore, PERS DBRP members with service purchase agreements who wished to move to the DCRP were required to complete or terminate their service purchases prior to moving to the DCRP. Currently only new PERS employees have the option to elect to join either the DBRP or the DCRP. Therefore, the only service purchase agreements that may be in existence would be for the purchase of service in MPERA-administered retirement systems other than PERS or service purchase contracts for inactive PERS members. Subsection (2)(c) is proposed to be amended to reflect that change.

The term "DBRP family law order" as used in this rule applies only to DBRP family law orders in existence for members of the PERS.

"The" is not needed before "MPERA" and is being deleted throughout the rules to save space and promote ease of reading.

2.43.1015 (2.43.3515) PURCHASE OF SERVICE NOT PERMITTED BY PARTICIPANT IN DEFINED CONTRIBUTION RETIREMENT PLAN (1) A member of ~~the~~ PERS with an existing non-PERS service purchase contract entered into pursuant to any MPERA statute or rule who wishes to elect the ~~Defined Contribution Retirement Plan (DCRP)~~ DCRP or the Montana University System's Optional Retirement Plan (ORP) must terminate or complete the service purchase contract before the election will be confirmed by MPERA.

(2) If a member of ~~the~~ PERS with an existing service purchase contract files an election form electing either the DCRP or the ORP, MPERA will send written notice to the member that the election cannot be confirmed until the service purchase contract is either terminated or completed.

(3) The notice will give the member 30 days to provide MPERA with written notification of the member's intentions.

(4) The member must choose one of the following options:

(a) pay to MPERA in a lump sum the entire amount remaining due under the service purchase contract and have the entire amount of service purchased under the contract transferred to the DCRP; or

(b) pay nothing more to MPERA and have the prorated amount of service purchased under the contract credited and applicable contributions transferred to the DCRP; or

(5) If a member chooses the option in (4)(a), the member may, pursuant to ARM 2.43.441, complete the service purchase contract with a rollover of funds from an eligible retirement plan account belonging to the member or a direct trustee-to-trustee transfer of funds from the member's 26 USC 403(b) tax-sheltered annuity or 26 USC 457 governmental plan, subject to (5)(a):

(a) A direct trustee-to-trustee transfer of funds from the member's 26 USC 403(b) or 26 USC 457 governmental plan prior to the member's severance from employment can be made only if the transfer is either for the purchase of permissive service credit (as defined in section 415(n)(3)(A) of the Internal Revenue Code) under the receiving defined benefit governmental plan or a repayment to which section 415 of the Code does not apply by reason of section 415(k)(3) of the Code. A purchase of service pursuant to 19-3-513, 19-5-409, 19-6-804, 19-7-804, 19-8-904, 19-9-411, or 19-13-405, MCA, is ~~not~~ a purchase of permissive service credit.

(6) If a member chooses the option in (4)(a), but then fails to complete the service purchase contract by the end of the member's 12-month election period, MPERA will unilaterally implement (4)(b).

(7) If a member with an existing service purchase contract fails to provide MPERA with written notice of the member's intentions within the 30 days provided in (3), MPERA will unilaterally implement (4)(b). MPERA will take this action at the close of the 30-day timeframe.

(8) A member with an existing service purchase contract who elects the DCRP or the ORP in the last month of the member's 12-month election period may pay to MPERA in a lump sum the entire amount remaining due under the service purchase contract. ~~and have the~~

(a) The entire amount of service purchased under the contract will then be transferred to the DCRP. ~~The payment must accompany the election form.~~

~~(a) If the member does not pay the entire amount due at the time the member files the election form, MPERA will unilaterally implement (4)(b).~~

(b) The member will not be given time to pay off the existing service purchase contract after the close of the member's 12-month election period.

(9) ~~A PERS~~ Any member of an MPERA-administered retirement system with an existing service purchase contract ~~entered into pursuant to any MPERA statute or rule~~ who does not elect the DCRP or the ORP may not terminate the service purchase contract pursuant to this rule.

AUTH: 19-2-403, 19-2-1010, 19-3-2104, MCA

IMP: 19-2-710, 19-3-2111, 19-3-2112, 19-3-2115, MCA

STATEMENT OF REASONABLE NECESSITY: At the time the DCRP was created, existing PERS members had one year to elect whether to participate in the DBRP or the DCRP. Many of those members had service purchase agreements. Service cannot be purchased by DCRP members. Therefore, PERS DBRP members with service purchase agreements who wished to move to the DCRP were required to complete or terminate their service purchases prior to moving to the DCRP. Currently only new PERS employees have the option to elect to join either the DBRP or the DCRP. Therefore, the only service purchase agreements that may be in existence would be for the purchase of service in MPERA-administered retirement systems other than PERS or service purchase contracts for inactive PERS members. Proposed amendments to (1), (8), and (9) reflect that change.

Subsection (4)(b) is proposed to be amended as service is "credited" to a member's account, while employee contributions are "transferred" to the DCRP. Subsection (5)(a) is proposed to be amended to clarify that only direct trustee-to-trustee transfers are permitted when purchasing permissive service credit while an active member.

"The" is not needed before "PERS" and is being deleted throughout the rules to save space and promote ease of reading. Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading. The other proposed changes are for clarification purposes only and have no substantive impact on the rule.

2.43.1017 (2.43.3517) FAMILY LAW ORDERS, EXECUTIONS, AND INCOME-WITHHOLDING ORDERS AND ELECTIONS (1) A member of ~~the~~ PERS who is subject to a PERS Family Law Order pursuant to 19-2-907, MCA, and wishes to elect the ~~Defined Contribution Retirement Plan (DCRP)~~ DCRP or the Montana University System's Optional Retirement Program (ORP), must have the Family Law Order amended to comply with the DCRP or ORP and approved by the board no later than the end of the member's 12-month election period.

(2) A member of ~~the~~ PERS who is subject to an execution or income-withholding order pursuant to 19-2-909, MCA, and wishes to elect the DCRP or the ORP, must have the execution or income-withholding order amended to comply with the DCRP or the ORP no later than the end of the member's 12-month election period.

(3) If the order discussed in (1) or (2) is not properly amended and approved by the close of the member's 12-month election period, MPERA will not confirm the member's election. The member will remain a participant of the ~~Defined Benefit Retirement Plan~~ DBRP.

AUTH: 19-2-403, 19-3-2104, MCA

IMP: 19-2-907, 19-2-909, 19-3-2111, MCA

STATEMENT OF REASONABLE NECESSITY: The term "DBRP family law order" as used in this rule applies only to DBRP family law orders in existence for members of the PERS. Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading. "The" is not needed before "PERS" and is being deleted throughout the rules to save space and promote ease of reading.

2.43.1020 (2.43.3520) ELECTION FOR EMPLOYEES IN OPTIONAL PERS MEMBERSHIP POSITIONS (1) An employee eligible for optional membership ~~under~~ who, pursuant to 19-3-412, MCA, ~~who~~ chooses to be a member of ~~the~~ PERS ~~on or after July 1, 2002,~~ will initially be a participant of the PERS ~~Defined Benefit Retirement Plan (DBRP)~~ DBRP. The DBRP participant will have ~~one year~~ 12 months from the ~~date he or she elects to be a member of the PERS~~ first day of the month following the month the member is initially reported to MPERA as a PERS member to file a retirement plan choice election form with ~~the~~ MPERA pursuant to ARM 2.43.1010.

(2) An employee who declines optional membership under 19-3-412, MCA, is not a member of ~~the~~ PERS and has no retirement plan choice.

AUTH: 19-2-403, 19-3-2104, MCA

IMP: 19-3-2104, 19-3-2111, MCA

STATEMENT OF REASONABLE NECESSITY: "The" is not needed before "MPERA" and is being deleted throughout the rules to save space and promote ease of reading. Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

MPERA does not generally track the actual day an employee with the option to join PERS elects to do so. Thus, the only true date known to MPERA is the initial date the member is reported to MPERA as a PERS member. The change is consistent with statutory changes in 2007. One year is proposed to be changed to 12 months to reflect the actual language in statute.

The other proposed changes are for clarification purposes only and have no substantive impact on the rule.

2.43.1031 (2.43.3531) TIMING OF TRANSFERS TO THE DEFINED CONTRIBUTION RETIREMENT PLAN (1) Once a member's election to join either the PERS ~~Defined Contribution Retirement Plan (DCRP)~~ DCRP or the Montana University System Optional Retirement Program (MUS ORP) has been confirmed, ~~the~~ MPERA will transfer ~~pre-July 1, 2002 contribution transfer amounts and July 1 and post-July 1 contribution amounts within the following timeframes:~~

~~(a) For elections received and confirmed prior to August 1, 2002:~~

(i) the pre-July 1, 2002 contribution transfer amount will be transferred to the participant's individual account in the DCRP or the MUS ORP no later than 30 working days after July 1, 2002 (August 13, 2002); and

~~(ii) the July contribution amount will be transferred to the individual account in the DCRP or the MUS ORP no later than 10 working days after the date the July payroll is received in good order.~~

~~(b) For elections received and confirmed after August 1, 2002, the pre-July 1, 2002 contribution transfer amount and the July 1 and post-July 1, 2002 ongoing contribution amount will be transferred~~ contributions to the participant's individual account in the DCRP or the MUS ORP ~~no later than~~ within 15 working days ~~after the MPERA confirms the election~~.

AUTH:19-2-403, 19-3-2104, MCA

IMP: 19-3-2114, 19-3-2117, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

When the DCRP was initially adopted, implementing rules were required to address current PERS members who had one year to elect whether to participate in the DCRP, the MUS ORP, or the DBRP. Those rules are no longer necessary as the one year window has expired. Subsection (1)(a) and portions of (1) and (1)(b) pertain only to the initial election window and are no longer relevant. MPERA proposes to repeal those subsections to avoid confusion and to reword other subsections to address the current election window. The other proposed changes are for clarification purposes only and have no substantive impact on the rule.

2.43.1032 (2.43.3532) CREDITING OF INDIVIDUAL ACCOUNTS

(1) MPERA will transfer a ~~Defined Contribution Retirement Plan (DCRP)~~ DCRP participant's statutorily required employee and employer contributions to the DCRP recordkeeper within two working days after receipt in good order of each reporting agency's contribution report and contributions.

(2) The DCRP recordkeeper will credit individual accounts and transfer contributions to a DCRP participant's selected investment option(s) within ~~two~~ one working ~~days~~ day after receipt of contributions from ~~the~~ MPERA.

AUTH: 19-2-403, 19-3-2104, MCA

IMP: 19-3-2117, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading. "The" is not needed before "MPERA" and is being deleted throughout the rules to save space and promote ease of reading.

The current recordkeeper, Great West Retirement Services, now has the ability to credit contributions within one day of receipt. This allows the contributions to be invested more rapidly.

2.43.1045 (2.43.3545) DISTRIBUTION TO PARTICIPANT (1) A ~~Defined Contribution Retirement Plan (DCRP)~~ DCRP participant is entitled to receive the participant's vested accounts upon termination of service in a PERS-covered position, whether for retirement or for other purposes.

(2) The participant shall, within 120 days after the participant terminates service in a PERS-covered position, notify ~~the~~ MPERA of the date upon which the participant wants distribution of the accounts to start.

(a) Distribution must start no later than April 1 of the calendar year following the later of:

(i) the calendar year in which the participant reaches age 70 1/2; or

(ii) the calendar year in which the participant retires from service in a PERS-covered position.

(b) If the participant does not select the date upon which distributions are to start, distributions will start 120 days after termination of service from a PERS-covered position.

(c) Once selected, the participant may change the distribution date provided the date continues to meet the requirements of (2)(a).

(3) The participant shall also, no later than 30 days before the start of the distribution of the accounts, select a payment option.

(a) Payment options include:

(i) a lump sum distribution of the participant's vested accounts, less applicable taxes;

(ii) a direct trustee-to-trustee rollover of the participant's vested accounts to an eligible retirement plan, an a traditional or Roth individual retirement account, or an annuity;

(iii) a regular rollover of the participant's vested accounts to an eligible retirement plan;

(iv) periodic payments of a fixed amount; or

(v) periodic payments based on the participant's life expectancy, determined annually~~; or~~

~~(vi) a life contingent annuity~~.

(b) No A payment option may only be selected ~~unless~~ if the amounts payable to the participant are expected to be at least equal to the minimum distribution required under section 401(a)(9) of the Internal Revenue Code and satisfy the minimum distribution incidental benefit requirements of section 401(a)(9)(G) of the Internal Revenue Code.

(c) If the participant does not select a payment option, the vested accounts will be paid in a lump sum, less applicable taxes.

(4) If the participant fails to choose a payment option or a distribution time, a lump-sum distribution with 20% withheld for federal taxes will occur 120 days after termination of service from a PERS-covered position.

AUTH: 19-2-403, 19-3-2104, MCA

IMP: 19-2-1007, 19-3-2123, 19-3-2124, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

The Public Pension Act of 2006 made significant improvements to the options available to participants who wish to rollover their accounts to other eligible retirement or eligible employer plans. The board is proposing to amend its rules to take advantage of these improvements. The changes significantly benefit members and participants of the retirement systems with little cost to the systems. However, failure to take advantage of the options has a tax consequence that the board believes should be set out in its rules.

2.43.1046 (2.43.3546) DISTRIBUTION UPON DEATH OF PARTICIPANT (1) If a ~~Defined Contribution Retirement Plan~~ DCRP participant dies prior to the start of the distribution of the participant's benefits, the participant's beneficiary, provided the beneficiary is the participant's spouse, has the same payment options as the participant would have had.

(a) Those payment options include:

(i) a lump sum distribution of the participant's vested accounts, less applicable taxes;

(ii) a direct trustee-to-trustee rollover of the participant's vested accounts to an eligible retirement plan, an a traditional or Roth individual retirement account, or an annuity;

(iii) a regular rollover of the participant's vested accounts to an eligible retirement plan;

(iv) periodic payments of a fixed amount; or

(v) periodic payments based on the beneficiary's life expectancy, determined annually~~; or~~

~~(vi) a life contingent annuity~~.

(b) No A payment option may only be selected ~~unless~~ if the amounts payable to the beneficiary are expected to be at least equal to the minimum distribution required under section 401(a)(9) of the Internal Revenue Code and satisfy the minimum distribution incidental benefit requirements of section 401(a)(9)(G) of the Internal Revenue Code.

(c) The beneficiary must select the payment option prior to 60 days after the receipt by the board of the satisfactory proof of the participant's death.

(d) If the beneficiary does not select a payment option, the vested accounts will be paid in a lump sum, less applicable taxes.

(2) If the beneficiary is not the member's spouse, the beneficiary may elect to rollover only to an individual retirement account or individual retirement annuity that is treated as an inherited individual retirement account or annuity.

(3) Unless the participant's beneficiary is the participant's spouse, the payment of benefits must start within 60 days after receipt by the board of satisfactory proof of the participant's death.

~~(3)~~ (4) If the beneficiary is the participant's spouse, the spouse may, within 60 days of the participant's death, elect to defer distribution until a date no later than the date the participant would have attained age 70 1/2.

AUTH:19-2-403, 19-3-2104, MCA

IMP: 19-2-1007, 19-3-2124, 19-3-2125, MCA

statement of reasonable necessity: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

The Public Pension Act of 2006 made significant improvements to the options available to the spouse of a deceased member who wishes to rollover their account to other eligible retirement or eligible employer plans. The board is proposing to amend its rules to take advantage of these improvements. The changes significantly benefit members and their spouses. However, the board wishes to also clarify that nonspouse beneficiaries are not entitled to the same options.

2.43.1101 (2.43.4606) DEFINITIONS (1) "DROP" means the deferred retirement option plan.

(2) "DROP ~~accrual~~ account" means the amount of money that has accrued to a DROP participant and includes the monthly DROP accrual plus post retirement adjustments, times the applicable number of months of participation, and interest.

(3) "Monthly DROP accrual" means the amount equal to the monthly benefit that would have been payable to the participant had the participant terminated and retired.

AUTH: 19-2-403, 19-9-1203, MCA

IMP: 19-9-1205, MCA

STATEMENT OF REASONABLE NECESSITY: The Montana Legislature changed the term "DROP accrual" to "DROP account" as that term is more descriptive. The rule is being changed for consistency purposes.

2.43.1104 (2.43.4609) DROP APPLICATION PROCESS (1) Eligible members who wish to participate in the DROP must file a DROP information request with ~~the~~ MPERA.

(2) The information request must include the member's:

(a) full name;

(b) social security number;

(d) date of birth; and

(e) anticipated date to start the DROP period.

(3) ~~The~~ MPERA will calculate estimates of monthly DROP accruals and the DROP benefit. The estimates and a DROP application will be sent to the member.

(4) An eligible member who wishes to participate must complete the DROP application and return it to ~~the~~ MPERA.

~~(a) Except as provided in (4)(b),~~ MPERA must receive the completed application at least two weeks before the first day of the month the member wants the DROP period to be effective; otherwise MPERA will notify the member that the DROP period will be effective the following month. If a birth certificate or other acceptable proof of age is required by the application, it must accompany the application for the application to be complete.

~~(b) An eligible member who retroactively applies to participate in the DROP within the window provided for in 19-9-1204(6), MCA, must file the application on or before October 1, 2003.~~

(5) Once the application is ~~received~~ filed ~~by the~~ with MPERA, the election to participate in the DROP is irrevocable.

AUTH: 19-2-403, 19-3-1203, MCA

IMP: 19-3-1203, 19-9-1204, MCA

statement of Reasonable Necessity: The window provided for in 19-9-1204(6), MCA, has expired. Subsection (4)(b) is being repealed to avoid confusion as it is no longer relevant or needed.

"The" is not needed before "MPERA" and is being deleted throughout the rules to save space and promote ease of reading. The term "submitted" should be replaced with the term "filed" as the application must be filed with MPERA by a certain date in order to become effective at the time selected by the member. Thus, the term "filed" as defined in ARM 2.43.301 is applicable to this situation.

2.43.1111 (2.43.4616) INTEREST PAID TO PARTICIPANTS (1) A participant's DROP ~~accrual~~ account must include compounded annual interest.

(2) ~~The~~ Subject to (3), the interest rate will be fixed at the end of each fiscal year and will equal the total rate of return for the trust fund. Interest rates for any part of the current fiscal year will be based on the previous fiscal year's total rate of return.

(3) Interest credited on the DROP account shall comply with any applicable provisions of 29 USC section 623(i)(10)(B)(i) of the federal Age Discrimination in Employment Act (ADEA) and any applicable federal treasury regulations establishing market rates of return for purposes of complying with ADEA.

(4) When the total rate of return for the trust fund is less than zero, participants will receive zero interest.

AUTH: 19-2-403, 19-9-1203, MCA

IMP: 19-9-1206, 19-9-1208, MCA

STATEMENT OF REASONABLE NECESSITY: The Montana Legislature changed the term "DROP accrual" to "DROP account" as that term is more descriptive. The rule is being changed for consistency purposes.

Pursuant to the Pension Protection Act of 2006, new section (3) is required in order for the PERS DCRP to remain a qualified retirement plan under the federal internal revenue code.

2.43.1112 (2.43.4617) DISTRIBUTION OF DROP BENEFIT (1) The DROP benefit will be distributed upon the participant's termination of employment. The participant may request to receive the DROP benefit in a lump sum, or in a direct rollover to another eligible plan, as allowed by the Internal Revenue Service (IRS).

(2) To make a direct rollover of the DROP benefit, the participant must make arrangements with the other plan and provide any necessary information to ~~the~~ MPERA.

(3) A participant must designate a distribution method within 60 days after termination of employment; otherwise ~~the~~ MPERA will pay the DROP benefit to the participant in a lump sum. Any required federal or state withholding will reduce the amount of the payment.

(4) MPERA will distribute the DROP benefit as soon as administratively feasible once all appropriate documents are ~~received~~ filed with MPERA.

(5) Upon a DROP participant's death, the participant's DROP benefit will be paid to the participant's survivors or, if no survivors exist, then to the participant's designatedbeneficiaries. The DROP benefit will be paid in a lump sum, unless the recipient is the surviving spouse, in which case the surviving spouse may choose to receive the DROP benefit in a lump sum or in direct rollover to another eligible retirement plan, as allowed by the IRS.

AUTH: 19-2-403, 19-9-1203, MCA

IMP: 19-9-1206, 19-9-1208, MCA

STATEMENT OF REASONABLE NECESSITY: The board is proposing to amend this rule to use the more accurate term "file". File is defined in rule. Using "file" rather than "receive" clarifies that the form must be received by MPERA (as opposed to an employer) before the DROP benefit can be distributed.

2.43.1210 (2.43.4203) DETENTION OFFICER MEMBERSHIP IN SHERIFFS' RETIREMENT SYSTEM (SRS) (1) An active PERS member on July 1, 2005 is eligible to become a member of the SRS, and an employee hired by a sheriff after July 1, 2005 must become a member of the SRS, pursuant to Title 19, chapter 7, part 3, MCA, if the member or employee meets the definition of "detention officer" in 19-7-101(2), MCA, which includes:

(a) being employed in a detention center, a juvenile detention center, a temporary detention center, or a detention facility;

(b) having authority and responsibility for maintaining custody of an inmate for any period of time and performing tasks related to the operation of a detention center; and

(c) completing, within the time allowed by ARM 23.14.526, a detention officers' basic course as provided by the Montana Law Enforcement Academy or equivalent training in a training school meeting the minimum standards of the Board of Crime Control, as required by ARM 23.14.526, pursuant to 44-4-301, MCA.

(2) An employee hired by a sheriff after July 1, 2005 who meets all the criteria to be a "detention officer", except completion of training, must be an SRS member from the first day of employment or, if later, the first day all criteria except completion of training are met.

(3) An SRS member who does not complete timely the training specified in (1)(c) will be considered to be a member of PERS after the time allowed by ARM 23.14.526 until training is completed. All contributions and the member's membership service and service credit will be adjusted as necessary. Otherwise, an employee who becomes a member of the SRS remains a member of the SRS until the member is no longer employed by the sheriff in a detention center.

AUTH: 19-2-403, MCA

IMP: 19-7-101, 19-7-301, 19-7-302, MCA

STATEMENT OF REASONABLE NECESSITY: Since (2) is covered in statute and it is the sheriffs' responsibility to identify detention officers for SRS coverage purposes, (2) is not needed. Section (3) is contrary to the definition of "detention officer" found in statute and contrary to 19-7-301(3), MCA. The training requirement is integral to remaining a detention officer. If the training requirement is not met, the individual is no longer employed as a detention officer. Section (3) addresses a situation that does not exist and is not necessary.

2.43.1211 (2.43.4204) DETENTION OFFICER ELECTION TO TRANSFER TO SHERIFFS' RETIREMENT SYSTEM (SRS) (1) An active PERS member who, on July 1, 2005, ~~meets~~ met all the criteria to be a "detention officer" ~~may~~ was eligible to make an election to become a member of SRS.

(2) To be an effective election, the written election form prescribed by the board, containing all the required information and including all necessary documentation, must be properly signed and must be filed with the board between July 1, 2005 and April 30, 2006, inclusive.

(3) A written election received by the board by the 15th day of a calendar month will be effective the first pay period of the following calendar month. A written election received by the board after the 15th day of a calendar month will be effective the first pay period of the second following calendar month.

~~(4)~~ A detention officer who ~~becomes a member of the SRS~~ elected to change retirement system membership from PERS to SRS pursuant to (1) has not terminated from service and is not eligible to receive any benefit from PERS until termination of employment.

AUTH: 19-2-403, MCA

IMP: 19-7-101, 19-7-301, 19-7-302, MCA

STATEMENT OF REASONABLE NECESSITY: Sections (2) and (3) pertain to the initial election window, July 1, 2005 through April 30, 2006, and are no longer relevant or necessary. Old section (4) is proposed to be amended as it applies only to individuals who were detention officers during the above-described window, not to detention officers hired after July 1, 2005.

2.43.1212 (2.43.4207) DETENTION CENTER REPORTS FROM SHERIFFS (1) On or before June 1 of each year, the board will provide each sheriff an employer report containing the information from the immediately preceding report, on which the sheriff need only provide new information or corrections regarding employees of the sheriffs' office.

(2) By the 15th day of July each year, the sheriff of each county with a detention center must file an the revised employer report with the board.

~~(2)~~ (3) The employer report will include information ~~necessary for the board to determine~~ documenting the appropriate retirement system for detention officers, as of June 30 of each year, including:

(a) each detention officer's name, social security number, retirement system, and date of initial employment in current position;

(b) whether the employee is ~~employed in a detention center, is~~ acting as a detention officer, and has completed a detention officers' basic course or equivalent training at a training school meeting the minimum standards of the Board of Crime Control or is expected to receive such training within the time allowed by ARM 23.14.526; and

(3) After the initial sheriffs' employer report, on or before the first working day of the fiscal year, the board will provide each sheriff a form containing the information from the immediately preceding report, on which the sheriff only need provide new information or corrections for filing with the board.

(4) Payment of the detention center payroll contributions will be considered delinquent pursuant to 19-2-506, MCA, until both the required contributions and valid employer reports are received by the board. If the sheriff's office employs no detention officers, the report referenced in (3) must indicate that there are no employees who are detention officers.

AUTH: 19-2-403, MCA

IMP: 19-7-101, 19-7-301, 19-7-302, MCA

STATEMENT OF REASONABLE NECESSITY: The 2005 Legislature gave detention officers the choice to join SRS. The current rule was drafted to address the initial detention officer report filed by each sheriff's office following the close of that election window, May 2006. Now that the initial reports have been filed, the reporting process is substantially easier. The board proposes to amend this rule to address the expedited reporting process as well as changes in the information required to be reported. Since the employer will be using an existing list of employees, some of those employees will have left employment. New (3)(c) recognizes that MPERA needs to know why previous detention officers are not being reported. New (4) requires confirmation that no detention officers exist if an individual later claims to have been a detention officer during the time period for which no report is filed because no detention officer existed.

2.43.1701 (2.43.3001) Family Law Orders � General Requirements (1) Upon request, MPERA will provide a checklist of mandatory and optional family law order (FLO) provisions.

(2) Information concerning a participant's account will only be released subject to the terms of ARM 2.43.303, and policies adopted by MPERA and the board.

(3) An Except with respect to the DCRP, an account cannot be established for an alternate payee in a retirement system or plan.

(4) A FLO may not force a member to:

(a) terminate employment;

(b) ~~apply for retirement~~ retire from employment; or

(5) Upon receipt of a certified copy of a stay from the issuing court or the Montana Supreme Court, ~~the~~ MPERA and the board will suspend further consideration or implementation of a proposed FLO. Unless otherwise directed by court order, ~~the~~ MPERA will retain payments withheld prior to receipt of the stay and simultaneously resume making payments of participant's full benefit. ~~The~~ MPERA will take further action only on receipt of a certified copy of an order directing such action. If the stay is lifted, ~~the~~ MPERA will proceed with consideration, approval, and implementation procedures.

(6) A restraining order may be used to temporarily stop or prohibit payment to a participant. The order must contain the same information identifying the participant and alternate payee as required for a FLO. If a proposed FLO is not received before the order expires, payments will resume and any retained payments will be made to the participant.

(7) The administrative cost, if any, of a FLO will be billed to the party filing the proposed FLO with the board, unless another party is designated in the FLO to pay the cost. Amounts owing may be offset against payments to be received by the appropriate party.

(8) An alternate payee may receive ~~payment~~ monthly benefit payments by electronic fund transfer upon submission of a properly executed form required by ~~the~~ MPERA.

(9) An alternate payee must promptly inform ~~the~~ MPERA of any change of name or address.

AUTH: 19-2-403, 19-2-907, MCA

IMP: 19-2-907, MCA

STATEMENT OF REASONABLE NECESSITY: Since the initial adoption of this rule, the board and MPERA have adopted policies regarding the release of confidential information. Those policies include provisions related to the release of a member's account information and should be referenced in this rule as an additional resource.

The board and its DCRP recordkeeper, Great West Retirement Services, have negotiated a process for creating a subaccount for alternate payees. Therefore, an account can now be established for an alternate payee using the alternate payee's personal information. However, the account cannot be distributed to the alternate payee until the member is eligible for a distribution of their account.

Subsection (4)(b) and (8) are proposed to be amended to better explain the purpose of those sections. For instance, a member need submit only one form to have all of their monthly benefit payments made by electronic fund transfer.

"The" is not needed before "MPERA" and is being deleted throughout the rules to save space and promote ease of reading.

2.43.1703 (2.43.3005) FAMILY LAW ORDERS -- APPROVAL AND IMPLEMENTATION FOR THE DEFINED CONTRIBUTION RETIREMENT PLAN (1) This rule applies only to the ~~defined contribution retirement plan~~ DCRP.

(2) A participant or alternate payee must submit a certified copy of a family law order (FLO) to ~~the~~ MPERA for board approval. The board has delegated authority for approval to the executive director.

(3) ~~The~~ MPERA will notify the participant and the alternate payee when it receives a certified copy of a FLO. The notice will explain the procedures for determining if the FLO can be approved.

(4) While reviewing the FLO, ~~the board may take steps to safeguard the alternate payee's rights. The steps the board may take include, but are not limited to, the following:~~ MPERA will work with the recordkeeper to

~~(a)~~ prevent ~~payments~~ distributions from the participant's account, but allow the participant to manage the investments; and

~~(b)~~ segregate the amounts, and earnings thereon, that will be owed to the alternate payee if the FLO is approved;.

~~(c)~~ (5) ~~pay the non-segregated amounts~~ The segregated amount, with any earnings thereon, will be distributed to the participant if the FLO is not approved within 18 months of the date it was received by MPERA and the participant is entitled to and requests distribution of the account~~; and~~.

~~(d) apply the FLO prospectively if approved more than 18 months after the date it was first received by MPERA.~~

(6) ~~The board~~ Upon approval of the FLO, MPERA will:

(a) notify the participant and the alternate payee ~~once~~ that the FLO is approved.; and

(b) work with the recordkeeper to ensure a separate subaccount containing the alternate payee's entitlement is created.

(i) The alternate payee will be given necessary information for managing the investments in the subaccount.

(ii) The subaccount will be distributed to the alternate payee upon termination of service or death of the participant.

(7) The FLO will be applied prospectively if approved more than 18 months after the date it was first received by MPERA.

AUTH: 19-2-403, 19-2-907, MCA

IMP: 19-2-907, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

"The" is not needed before "MPERA" and is being deleted throughout the rules to save space and promote ease of reading. The rule is proposed to be slightly restructured to reflect the order in which processing of FLOs occurs.

Current (5)(c) is incorrect in two respects. First, the language could be interpreted to require distribution to the participant whether or not the participant wants a distribution of their account. Second, pursuant to section 414(p) of the Internal Revenue Code, the member's entire account, including the segregated portion, is subject to distribution after the 18-month time period expires. The term "distribution" is used in federal law and more descriptive than "payment".

The board and its DCRP recordkeeper, Great West Retirement Services, have negotiated a process for creating a subaccount for alternate payees. Therefore, an account can now be established for an alternate payee using the alternate payee's personal information. The alternate payee controls investment of his or her subaccount while the member continues to control the investment of their account. However, the account cannot be distributed to the alternate payee until the member is eligible for a distribution of his or her account.

2.43.1704 (2.43.3008) FAMILY LAW ORDERS -- CONTENTS AND DURATION FOR Defined benefit plans (1) Pursuant to this rule and ARM 2.43.1705, the board will accept and apply family law orders (FLOs) in the ~~public employees' defined benefit retirement plan~~ PERS DBRP, and the ~~judges', sheriffs', game wardens' and peace officers', highway patrol officers', municipal police officers', and firefighters' unified retirement systems~~ JRS, SRS, GWPORS, HPORS, MPORS, and FURS.

(2) Specific designations of a participant(s) in a FLO may include:

(a) for all systems and plans listed in (1), an individual "member" (active, inactive, or retired);

(b) for the ~~public employees' defined benefit retirement plan~~ PERS DBRP, or ~~the judges', sheriffs', and game wardens' and peace officers' retirement systems~~ JRS, SRS, and GWPORS, "primary" and "contingent beneficiaries" eligible to receive a lump sum payment and "contingent annuitants"; and

(c) for ~~the highway patrol officers', municipal police officers', and firefighters' unified retirement systems~~ HPORS, MPORS, and FURS, "survivors" and "designated beneficiaries" who are eligible to receive lump sum payments.

(3) A FLO may specify a future effective date provided:

(a) a FLO may not be effective any earlier than the date the FLO is received by MPERA;

(b) if the participant is a benefit recipient, the first monthly benefit payment that may be divided is the first benefit payment following the month MPERA receives the FLO; and

(c) a FLO may not provide for payments to an alternate payee prior to the date on which the participant first receives a payment from the retirement system or plan.

(4) Unless otherwise specified in the FLO, payments to an alternate payee will continue only while the participant is receiving payments. The FLO may further limit payments to:

(a) the life of the participant whose payment rights are being transferred;

(b) a specified maximum time;

(d) the life of a designated participant.

(5) The two basic types of payments allowed to alternate payees are:

(a) A "defined sum" must designate a specific total dollar amount to be paid to the alternate payee in the form of a fixed dollar amount payable for a designated maximum number of months. If the fixed monthly payment designated is more than the total monthly benefit or payment to the participant, the lesser amount will be paid until the alternate payee receives the specific total dollar amount. If the defined sum cannot be divided evenly by the number of payments or monthly amount, any odd amount will be paid in the first payment. The defined sum, the designated monthly dollar amount, and the designated number of months will not be increased by subsequent conditions or events. Payments will cease when the defined sum is paid or when payments from the account end.

(b) A FLO may order "proportionate payments" by designating either a fixed percentage or a formula describing how to calculate the percentage. The fixed percentage must be expressed as a specific percentage or as a fraction for which the numerator and denominator are indicated. A formula calculating a fixed percentage may use months, years, or dollar amounts to establish a proportionate benefit.

(6) If MPERA is unable to locate an alternate payee upon the death of the participant, MPERA will use IRS's letter forwarding service in a final attempt to locate.

AUTH: 19-2-403, 19-2-907, MCA

IMP: 19-2-907, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

"The" is not needed before "MPERA" and is being deleted throughout the rules to save space and promote ease of reading.

MPERA recently learned of the IRS's letter forwarding service. The board has requested that MPERA use that process in order to attempt to locate alternate payees who fail to keep their address up to date.

2.43.1802 (2.43.5102) ADOPTION OF INVESTMENT POLICY STATEMENT AND STABLE VALUE FUND INVESTMENT GUIDELINES (1) The board adopts and incorporates by reference the State of Montana 457 Plan (deferred compensation) Investment Policy Statement approved by the board on ~~February 8, 2007~~ January 10, 2008.

(2) The board adopts and incorporates by reference the State of Montana 457 Plan Full Discretion Guidelines for the ~~Stable Value Investment Option~~ stable value investment option approved by the board on ~~February 22, 2001~~ December 13, 2007.

(3) Copies of the 457 Plan Investment Policy Statement and Full Discretion Guidelines may be obtained from ~~the~~ MPERA, 100 North Park Avenue, Suite 200, P.O. Box 200131, Helena, MT 59620-0131, phone 1(877)275-7372, e-mail mpera@mt.gov. The documents are also available on-line at mpera@mt.gov.

AUTH: 19-50-102, MCA

IMP: 19-50-102 MCA

STATEMENT OF REASONABLE NECESSITY: The Employee Investment Advisory Council, with the assistance of the plan's investment consultant, reviews the 457 deferred compensation plan's investment options and compares the options to the plan's investment policy statement (IPS). The IPS establishes the requirements and criteria for the investment options within the plan, as well as the requirements and criteria to be followed when changing investment options. The IPS must be reviewed by the board annually.

Similarly, the Stable Value Fund Investment Guidelines were amended in December 2007 but are not effective until contracts between the stable fund providers and the board are amended, projected for September 2008.

2.43.1803 (2.43.5103) DEFERRED COMPENSATION PLAN INVESTMENT OPTIONS (1) The board will choose, regularly review, and may discontinue, add, or change investment options offered to participants of the Deferred Compensation Plan. In doing so, the board will consider recommendations of the statutorily established Employee Investment Advisory Council and follow criteria established in the Plan's Investment Policy Statement.

(2) A Deferred Compensation Plan participant with assets in a discontinued investment option will be given notice and 90 days to move assets from the investment option being discontinued to an offered investment option. Assets remaining in a discontinued investment option at the end of the 90-day period will be automatically transferred to the investment option similar in investment category and style selected by the board to replace the discontinued investment option. If the discontinued investment option is not replaced, the board will transfer the fund balance to ~~the stable value~~ a balanced fund offered by the Deferred Compensation Plan.

(3) ~~No notice will be provided~~ Deferred Compensation Plan participants will be provided a minimum of 30 days notice if the board replaces or changes the ~~Stable Value Investment Option Manager~~ stable value investment option manager. The ~~Stable Value Investment~~ stable value investment option assets will automatically transfer to the new manager(s).

AUTH: 19-50-102, MCA

IMP: 19-50-102, MCA

STATEMENT OF REASONABLE NECESSITY: In section (1) the board proposes to clarify that it is required to follow the Plan's Investment Policy Statement, while it need only "consider" recommendations of the Employee Investment Advisory Council. Current language leaves the impression that the board need only consider the Plan's Investment Policy Statement, which is incorrect.

Pursuant to requirements contained in the Pension Protection Act of 2006, a stable value fund can no longer be a 457 Plan's default fund. Therefore, upon recommendation of the Employee Investment Advisory Council, the Public Employees' Retirement Board determined on August 14, 2008, to name a balanced fund as its default fund.

The same request for proposals process is used for selecting mangers of the stable value investment option as is used for changing managers of other fund classes. The board sees no reason to not inform Deferred Compensation Plan participants when the stable value investment option manager is set to change. Public notice should be encouraged. The Gregg Reference Manual, relied on by the Secretary of State's Office, does not permit capitalization of titles such as those used in this rule.

2.43.1810 (2.43.5110) QUALIFIED DOMESTIC RELATIONS ORDERS -- GENERAL REQUIREMENTS (1) The board will accept and implement ~~Qualified Domestic Relations Orders (QDROs)~~ QDROs in the Deferred Compensation (457) Plan sponsored by the State of Montana.

(2) Upon request, MPERA will provide to the public a checklist of required and optional provisions for QDROs.

(3) Information concerning a participant's account will only be released subject to the terms of ARM 2.43.303.

(4) Upon receipt of a certified copy of a stay from the issuing court or the Montana Supreme Court, MPERA and the board will suspend further consideration or implementation of a Domestic Relations Order (DRO). Unless otherwise directed by court order, MPERA will not distribute the participant's 457 account pending resolution of the stay. MPERA will take further action only on receipt of a certified copy of an order directing such action. If the stay is lifted, MPERA will proceed with consideration, approval, and implementation procedures.

(5) A restraining order may be used to temporarily stop or prohibit payment to a participant. The order must contain the same information identifying the participant and alternate payee as required for a QDRO. If a DRO is not received before the order expires, payments will resume and any retained payments will be made to the participant.

(6) The board will not charge a fee for approving or implementing a QDRO. However, the board may charge a reasonable fee if a participant, an alternate payee, or any of their attorneys make excessive demands of MPERA staff to provide assistance in drafting a DRO which can be qualified.

(7) Any fees required by a third party administrator or record keeper for segregated accounts will be charged against the participant's account unless the QDRO states the fee should be deducted from amounts paid to the alternate payee.

(8) The alternate payee must promptly inform MPERA of any change of name or address prior to payment of their share of the participant's account.

AUTH: 19-50-102, MCA

IMP: 19-50-102, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

The same administrative process applies to the qualification of DROs that applies to the approval of FLOs. The board believes it will be helpful to clarify that process for participants of the 457 deferred compensation plan. Sections (4) through (8) have been moved from ARM 2.43.1812 Qualified Domestic Relations Orders -- Approval and Implementation as they address general requirements for 457 plan QDROs rather than implementation requirements.

2.43.1811 (2.43.5111) QUALIFIED DOMESTIC RELATIONS ORDERS -- CONTENTS (1) A ~~Qualified Domestic Relations Order (QDRO)~~ QDRO must contain the following information:

(a) the name, ~~last known~~ current mailing address, date of birth, and social security number of the participant;

(b) the name, ~~last known~~ current mailing address, date of birth, and social security number of the alternate payee;

(c) the amount or percentage of the participant's account, distribution, or payments to be paid by the Deferred Compensation (457) Plan to the alternate payee, or a description of how to calculate the amount or percentage;

(d) the number of payments or the period of time to which the order applies if the participant is receiving periodic or annuity payments; and

(e) if the participant receives lump sum payments in addition to periodic payments, the QDRO must specify a separate proportion or fixed amount to be applied to the lump sum payments. Otherwise the lump sum payments will not be divided.

(2) A QDRO must meet the following requirements:

(a) a QDRO must create or recognize the right of an alternate payee to all or a portion of a participant's account;

(b) a QDRO must relate to Title 40, MCA marital property rights, alimony, or child or other dependent support;

(c) the specified distribution or payment must be of a type or form permitted under the Deferred Compensation (457) Plan;

(d) the specified amount or duration of the payment to the alternate payee may not be greater than that available to the participant under the Deferred Compensation (457) Plan;

(e) the alternate payee may not be granted payment of any benefits that have already been awarded to another alternate payee under another order previously determined to be a QDRO; and

(f) the QDRO must contain a statement that the QDRO is subject to review and approval by the board.

AUTH: 19-50-102, MCA

IMP: 19-50-102, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

Parties involved in preparing a DRO are the best sources of address information. It is incumbent upon them to provide current rather than "last known" addresses for both the participant and the alternate payee. Knowing the most current address may assist MPERA in locating participants or alternate payees in the future.

2.43.1812 (2.43.5112) QUALIFIED DOMESTIC RELATIONS ORDERS -- APPROVAL AND IMPLEMENTATION (1) A participant or alternate payee must submit a certified copy of a ~~Domestic Relations Order (DRO)~~ DRO to ~~the~~ MPERA for board approval. The board may delegate authority for approval to the executive director.

(2) ~~The~~ MPERA will notify the participant and the alternate payee when it receives a certified copy of a DRO. The notice will explain the procedures for determining if the DRO is qualified.

(3) While reviewing the DRO, ~~the board may take steps to safeguard the alternate payee's rights. The steps the board may take include, but are not limited to, the following:~~ MPERA will work with the recordkeeper to:

(a) prevent ~~payments~~ distributions from the participant's account, but allow the participant to manage the investments; and

(b) segregate the amounts, and earnings thereon, that will be owed to the alternate payee if the DRO is qualified;.

~~(c)~~ (4) ~~pay the nonsegregated amounts~~ The segregated amount, with any earnings thereon, will be distributed to the participant if the DRO is not qualified within 18 months of the date it was received by MPERA and the participant is entitled to and requests distribution of the account~~; and~~ .

~~(d) apply the DRO prospectively if approved more than 18 months after the date it was first received by MPERA.~~

(4) Any fees required by a third party administrator or record keeper for segregated accounts will be charged against the participant's account unless the qualified domestic relations order (QDRO) states the fee should be deducted from amounts paid to the alternate payee.

(5) The information and requirements identified in ARM 2.43.1811 are considered the minimum the board needs to administer a QDRO. Domestic relations orders that do not contain the minimum information or address the minimum requirements are not QDROs and will be rejected by the board as not qualified. Rejected orders will be returned to the appropriate party with information on how to have the DRO qualified.

(6) Once the DRO is qualified, the board will:

(a) notify the participant and the alternate payee that the DRO is being implemented as a QDRO; and

(b) apply the QDRO prospectively if approved more than 18 months after the date it was first received by MPERA.

(7) The alternate payee may receive their payment only as a direct payment, a rollover, or a transfer.

~~(8)~~ (a) If the alternate payee is ~~already~~ a participant or is eligible to participate in the State's Deferred Compensation (457) Plan and establishes an account, the alternate payee's ~~payments~~ distribution may be made to the alternate payee's 457 plan account.

(b) ~~However, if~~ If the alternate payee is not eligible to participate in the state's Deferred Compensation (457) Plan, a 457 plan account cannot be established for the alternate payee.

(9) Upon receipt of a certified copy of a stay from the issuing court or the Montana Supreme Court, the MPERA and board will suspend further consideration or implementation of a DRO. Unless otherwise directed by court order, the MPERA will not distribute the participant's 457 account pending resolution of the stay. The MPERA will take further action only on receipt of a certified copy of an order directing such action. If the stay is lifted, the MPERA will proceed with consideration, approval and implementation procedures.

(10) A restraining order may be used to temporarily stop or prohibit payment to a participant. The order must contain the same information identifying the participant and alternate payee as required for a QDRO. If a DRO is not received before the order expires, payments will resume and any retained payments will be made to the participant.

(11) The board will not charge a fee for approving or implementing a QDRO. However, the board may charge a reasonable fee if a participant, an alternate payee or any of their attorneys make excessive demands of MPERA staff to provide assistance in drafting a DRO which can be qualified.

AUTH: 19-50-102, MCA

IMP: 19-50-102, MCA

STATEMENT OF REASONABLE NECESSITY: Acronyms are being defined and will be used throughout the rules to save space and to promote ease of reading.

Current (3)(c) is incorrect in two respects. First, the language could be interpreted to require distribution to the participant whether or not the participant wants a distribution of their account. Second, pursuant to section 414(p) of the Internal Revenue Code, the member's entire account, including the segregated portion, is subject to distribution after the 18-month time period expires. The term "distribution" is used in federal law and more descriptive than "payment."

Current (4) and (9) through (11) have been moved to ARM 2.43.1810 Qualified Domestic Relations Orders -- General Requirements as they address general requirements for 457 plan QDROs rather than implementation requirements.

Section (7) is proposed to be redrafted to clarify that the alternate payee must be eligible to participate and have an account in the state's 457 deferred compensation plan in order to transfer their portion of the participant's account to the 457 deferred compensation plan.

5. The department proposes to repeal the following rules:

2.43.409 IMPROPER CREDIT

AUTH: 19-2-403, 19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201, 19-13-202, MCA

IMP: 19-2-903, 29-3-1403, 19-5-703, 19-6-704, 19-7-704, 19-8-804, 19-9-1003, 19-13-1002, MCA

STATEMENT OF REASONABLE NECESSITY: This rule is being repealed as it has been integrated into New Rule I.

2.43.425 INCOMPLETE PAYMENTS

AUTH: 19-2-403, 19-3-2104, MCA

IMP: 19-2-602, 19-2-704, Title 19, ch. 3, part 5, 19-3-2115, 19-5-409, Title 19, ch. 6, part 8, ch. 7, part 8, ch. 8, part 9, ch. 9, part 4, ch. 13, part 4, MCA

STATEMENT OF REASONABLE NECESSITY: Section (1) addresses members of any MPERA-administered system who terminate employment covered by that system prior to completion of the service purchase contract. This situation is covered in 19-2-704, MCA, as is (2). Section (3) applied only to PERS members during the initial election window. That window has expired.

2.43.428 ACCEPTABLE DOCUMENTATION OF PUBLIC SERVICE EMPLOYMENT

AUTH: 19-2-403, MCA

IMP: 19-2-715, 19-3-503, 19-3-505, 19-3-510, 19-3-512, 19-3-515, 19-6-801, 19-6-803, 19-7-803, 19-8-901, 19-8-903, 19-9-403, 19-13-403, MCA

STATEMENT OF REASONABLE NECESSITY: The board believes that the subject matter of this rule should be included in ARM 2.43.410 to better assist members in determining the type of documents that can be used to document public employment. Therefore, the board recommends that the language be included in ARM 2.43.410 and that ARM 2.43.428 be repealed.

2.43.429 FULL SALARY CREDIT FOR TEMPORARY WORK REDUCTIONS

AUTH: 19-3-304, 19-6-201, 19-7-201, 19-8-201, 19-9-201, 19-13-202, MCA

IMP: 19-3-308, 19-6-204, 19-7-203, 19-8-204, 19-9-204, 19-13-205, MCA

STATEMENT OF REASONABLE NECESSITY: The statutes this rule implements were repealed. Therefore, the rule is obsolete and should also be repealed.

2.43.430 OUT-OF-STATE OR FEDERAL PUBLIC SERVICE

AUTH: 19-2-403, 19-3-304, MCA

IMP: 19-3-512, 19-6-803, 19-8-903, MCA

STATEMENT OF REASONABLE NECESSITY: This rule is proposed to be repealed as the process for purchasing all types of service is now in New Rule V.

2.43.520 ELECTION FOR GUARANTEED ANNUAL BENEFIT ADJUSTMENT COVERAGE (GABA)

AUTH: 19-2-403, 19-2-1101, 19-5-901, 19-6-710, 19-9-1009, 19-13-1010, MCA

IMP: 19-2-1101, 19-5-901, 19-5-902, 19-6-710, 19-6-711, 19-9-1009, 19-1010, 19-9-1013, 19-13-1010, 19-13-1011, MCA

Statement of Reasonable Necessity: All GABA election periods have expired. The rule is no longer applicable or needed for MPERA to administer the retirement systems. Continued existence of the rule would only confuse members and perhaps mislead them to believe they remain eligible to elect to participate in GABA.

2.43.605 DESIGNATION OF BENEFICIARY

AUTH: 19-3-304, 19-5-201, 19-6-201, 19-7-201, 19-8-201, 19-9-201, 19-13-202, MCA

IMP: 19-3-1301, 19-5-602, 19-6-602, 19-7-602, 19-8-702, 19-9-912, 19-13-903, MCA

STATEMENT OF REASONABLE NECESSITY: The designation of beneficiary process for members is clearly set out in 19-2-801, MCA. No rule is needed.

2.43.606 CONVERSION OF OPTIONAL RETIREMENT

AUTH: 19-2-403, 19-5-701, 19-7-1001, 19-8-801, MCA

IMP: 19-3-1501, MCA

STATEMENT OF REASONABLE NECESSITY: Language regarding optional benefit conversion options for all applicable retirement systems is set forth in statute. This rule is inconsistent with those statutes. This rule must be repealed as it is wrong. A replacement rule is not required as statute covers the necessary details.

2.43.609 POST-RETIREMENT ADJUSTMENT

AUTH: 19-3-304, 19-7-201, 19-8-201, MCA

IMP: 19-3-1109, 19-3-1110, 19-3-1111, 19-7-708, 19-7-709, 19-7-710, 19-8-808, 19-8-809, 19-8-810, MCA

STATEMENT OF REASONABLE NECESSITY: Post retirement adjustments have been replaced by the guaranteed annual benefit adjustment (GABA). This rule is no longer necessary and should be repealed.

2.43.610 MINIMUM BENEFIT ADJUSTMENT FOR RETIREES WITH PART-PAID FIREFIGHTER SERVICE

AUTH: 19-13-202, MCA

IMP: 19-13-1007, 19-13-1009, MCA

STATEMENT OF REASONABLE NECESSITY: This rule mirrors statutory language and adds nothing of value. It should be repealed.

2.43.1030 TRANSFER OF DEFINED BENEFIT RETIREMENT PLAN FUNDS TO THE DEFINED CONTRIBUTION RETIREMENT PLAN for previously inactive members

AUTH: 19-2-403, 19-3-2104, 19-3-2112, MCA

IMP: 19-3-2112, 19-3-2114, 19-3-2117, MCA

STATEMENT OF REASONABLE NECESSITY: The board proposes to repeal this rule as it is no longer necessary. Sections (1) through (3) pertain to the initial election window, which expired June 30, 2003, and are no longer needed. The remaining subsections are still applicable, but are adequately addressed in statute.

6. The department proposes to transfer the following rules:

OLD

NEW

2.43.201

(2.43.1401)

MODEL PROCEDURAL RULE

2.43.202

(2.43.1402)

APPLICABILITY OF RULES

2.43.304

(2.43.1306)

REQUEST FOR RELEASE OF

INFORMATION BY MEMBERS

2.43.512

(2.43.2705)

SUSPENSION OF DISABILITY BENEFITS

-- NOTICE

2.43.513

(2.43.2706)

CANCELLATION OF DISABILITY

BENEFITS FOR REFUSAL TO COMPLY -

- NOTICE

2.43.901

(2.43.2201)

TREATING SALARY DEFERRALS UNDER

A CAFETERIA PLAN AS COMPENSATION

- POLICY AND OBJECTIVES

2.43.902

(2.43.2202)

TREATING SALARY DEFERRALS UNDER

A CAFETERIA PLAN AS COMPENSATION

- APPLICABILITY

2.43.909

(2.43.2209)

PROCEDURES - COMPENSATION MUST

BE TREATED CONSISTENTLY

2.43.910

(2.43.2210)

PROCEDURES - PLANS THAT OFFER A

CHOICE AMONG NONTAXABLE

BENEFITS ONLY

2.43.911

(2.43.2211)

PROCEDURES - BONA FIDE CAFETERIA

PLANS

2.43.1001

(2.43.3501)

ADOPTION OF DEFINED CONTRIBUTION

PLAN DOCUMENT AND TRUST AGREEMENT

2.43.1005

(2.43.3505)

ESTABLISHMENT OF LONG-TERM

DISABILITY TRUST FUND

2.43.1023

(2.43.3523)

MEMBERSHIP IN OTHER TITLE 19

RETIREMENT PLANS

2.43.1024

(2.43.3524)

RETIREES NOT ENTITLED TO ELECTION

2.43.1025

(2.43.3525)

MONTANA UNIVERSITY SYSTEM

EMPLOYEE ELECTIONS

2.43.1040

(2.43.3540)

DISABILITY BENEFITS FOR MEMBERS

OF THE DEFINED CONTRIBUTION

RETIREMENT PLAN

2.43.1105

(2.43.4610)

DROP PERIOD

2.43.1108

(2.43.4613)

DROP PARTICIPATION LIMITS

2.43.1110

(2.43.4615)

ESTIMATED MONTHLY DROP ACCRUAL

2.43.1113

(2.43.4618)

DISTRIBUTION OF DROP BENEFIT

PURSUANT TO FAMILY LAW ORDER

2.43.1115

(2.43.4620)

EMPLOYMENT AFTER THE DROP

PERIOD

2.43.1118

(2.43.4623)

GUARANTEED ANNUAL BENEFIT

ADJUSTMENT INCREASES FOR DROP

PARTICIPANTS

2.43.1119

(2.43.4624)

MINIMUM BENEFIT FOR DROP

PARTICIPANTS

2.43.1702

(2.43.3004)

FAMILY LAW ORDERS -- GENERAL

REQUIREMENTS

2.43.1705

(2.43.3009)

FAMILY LAW ORDERS -- APPROVAL

AND IMPLEMENTATION FOR DEFINED

BENEFIT PLANS

2.43.1801

(2.43.5101)

ADOPTION OF DEFERRED

COMPENSATION PLAN DOCUMENT AND

TRUST AGREEMENT

STATEMENT OF REASONABLE NECESSITY: These rules are proposed to be transferred as the Public Employees' Retirement Board is completely reorganizing and restructuring its rules. The proposed restructure will better align with the statutes administered by the board and with the services provided by the board. Transfer of these rules, together with the restructuring of all board-administered rules, will enable MPERA employees, covered employers, and retirement system members to more easily locate rules applicable to their needs and situation.

7. Concerned persons may submit their data, views, or arguments either orally or in writing at the hearing. Written data, views, or arguments may also be submitted to: Roxanne M. Minnehan, Montana Public Employee Retirement Administration, 100 North Park Avenue, Suite 200, P.O. Box 200131, Helena, Montana 59620-0131; fax (406) 444-5428; or e-mail rminnehan@mt.gov, and must be received no later than 5:00 p.m., October 17, 2008.

8. Angela Salvitti, Paralegal for the Montana Public Employee Retirement Administration, has been designated to preside over and conduct this hearing.

9. The department 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 2 above or may be made by completing a request form at any rules hearing held by the department.

10. An electronic copy of this Proposal Notice is available through the Secretary of State's web site at http://sos.mt.gov/ARM/Register. The Secretary of State strives to make the electronic copy of the Notice conform to the official version of the Notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the Notice and the electronic version of the Notice, only the official printed text will be considered. In addition, although the Secretary of State works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.

11. The bill sponsor notice requirements of 2-4-302, MCA, apply and have been fulfilled. The primary bill sponsors were notified by United States Postal Service on November 9, 2007.

/s/ Melanie Symons /s/ Jay Klawon

Melanie Symons, Legal Counsel and Jay Klawon

Rule Reviewer President

Public Employees' Retirement Board

/s/ Michael P. Manion

Michael P. Manion, Chief Legal Counsel and

Rule Reviewer

Certified to the Secretary of State September 2, 2008.