HOUSE BILL 291

51st legislature - STATE OF NEW MEXICO - second session, 2014

INTRODUCED BY

Larry A. Larrañaga

AN ACT

RELATING TO PENSIONS; ENACTING THE DEFERRED RETIREMENT OPTION PLAN ACT APPLICABLE TO POLICE OFFICERS WHO ARE MEMBERS UNDER AN APPLICABLE COVERAGE PLAN PURSUANT TO THE PUBLIC EMPLOYEES RETIREMENT ACT; PROVIDING FOR CONTINUED EMPLOYMENT FOR POLICE OFFICERS WHO OTHERWISE MEET THE AGE AND SERVICE REQUIREMENTS FOR NORMAL RETIREMENT; PROVIDING FOR THE ADMINISTRATION OF THE PROVISIONS OF THE DEFERRED RETIREMENT OPTION PLAN ACT; CREATING THE DEFERRED RETIREMENT OPTION PLAN FUND; PROVIDING FOR INTEREST-BEARING DEFERRED RETIREMENT OPTION PLAN ACCOUNTS; REQUIRING CONTRIBUTIONS BY PARTICIPANTS IN THE PLAN AND BY THEIR EMPLOYERS; PROVIDING DEFINITIONS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. [NEW MATERIAL] SHORT TITLE.--Sections 1 through 11 of this act may be cited as the "Deferred Retirement Option Plan Act".

     SECTION 2. [NEW MATERIAL] PURPOSE.--The purpose of the Deferred Retirement Option Plan Act is to provide an incentive for skilled and trained police officers who are eligible to retire pursuant to the applicable age and service requirements for normal retirement under the Public Employees Retirement Act to continue police officer employment with affiliated public employers, make the applicable contributions for that employment and earn interest on their pension benefits before retirement.

     SECTION 3. [NEW MATERIAL] DEFINITIONS.--As used in the Deferred Retirement Option Plan Act:

          A. "affiliated public employer" means the state and any public employer affiliated with the association as provided pursuant to the Public Employees Retirement Act, but does not include an employer pursuant to the Magistrate Retirement Act, the Judicial Retirement Act or the Educational Retirement Act;

          B. "association" means the public employees retirement association;

          C. "board" means the retirement board of the association;

          D. "continued employment" means an option plan participant's police officer employment with the affiliated public employer;

          E. "disbursement payment" means the payment made, in the form selected, in an amount equal to the balance in a participant's option plan account after the participant terminates continued employment and participation in the option plan;

          F. "employer contributions" means employer contributions paid, on behalf of a participant, by the affiliated public employer pursuant to the applicable coverage plan under the Public Employees Retirement Act;

          G. "fund" means the deferred retirement option plan fund;

          H. "option plan" means the deferred retirement option plan;

          I. "option plan account" means the individual account of a participant to which the participant pension benefit payment and interest payments are credited;

          J. "participant" means a police officer, other than a police chief, who meets the age and service requirements for normal retirement under the applicable coverage plan pursuant to the Public Employees Retirement Act but who instead participates in the option plan with continued employment with an affiliated public employer;

          K. "participant contributions" means the contribution amounts deducted pursuant to the applicable member coverage plan under the Public Employees Retirement Act from the salary of a participant and credited to the participant's individual account;

          L. "participant pension benefit payment" means the pension benefit payment amount deposited into the fund and credited to the participant's option plan account during the period of the participant's continued employment;

          M. "police officer" means a member as defined pursuant to the Public Employees Retirement Act who is covered under an applicable coverage plan pursuant to that act; who is a certified police officer and, in that capacity, is employed by an affiliated public employer, including the state; and who has taken the oath prescribed for police officers;

          N. "police officer employment" means the functions and duties required of and performed by a police officer; and

          O. "salary" means the base salary or wages paid a participant for personal services rendered pursuant to the participant's continued employment with the affiliated public employer.

     SECTION 4. [NEW MATERIAL] DEFERRED RETIREMENT OPTION PLAN CREATED--ADMINISTERED BY BOARD.--

          A. The "deferred retirement option plan" is created. The option plan shall be administered by the association pursuant to the provisions of the Deferred Retirement Option Plan Act. The board shall promulgate rules to carry out the provisions of that act.

          B. The legislature may suspend entrance into the option plan for prospective participants and may modify the terms and requirements for participation in the option plan as deemed necessary.

          C. The provisions of the Deferred Retirement Option Plan Act and the requirements for participation in the option plan are separate and apart from, and are not subject to the terms of, any collective bargaining agreement.

     SECTION 5. [NEW MATERIAL] FUND ESTABLISHED--ADMINISTRATION OF FUND--ACCOUNTING FUNDS.--

          A. The "deferred retirement option plan fund" is created in the state treasury. The fund consists of money received from participant pension benefit payments, employer and participant contributions on behalf of a participant and any investment earnings on the balance in the fund. The board is the trustee of the fund and shall administer and invest the fund. Any deposits into the fund shall be invested by the board as provided in the Public Employees Retirement Act. Expenses related to the investment of the fund and administration of the provisions of the Deferred Retirement Option Plan Act shall be paid from the fund.

          B. For purposes of this section, the accounting funds shall be known as the "participant pension benefit plan fund", the "participant contribution fund", the "employer contribution fund", the "disbursement reserve fund" and the "income fund". The maintenance of separate accounting funds shall not require the actual segregation of the assets of the fund.

          C. The accounting funds provided for in this section are trust funds and shall be used only for the purposes provided for in the Deferred Retirement Option Plan Act.

          D. The participant contribution fund is the accounting fund in which shall be accumulated contributions of participants and from which shall be made transfers of accumulated participant contributions to the member contribution fund pursuant to the Public Employees Retirement Act. The participant's affiliated public employer shall cause participant contributions to be deducted from the salary of the participant and shall remit the deducted contributions to the association in accordance with procedures and schedules established by the association. The association may assess an interest charge and a penalty charge on any late remittance. Contributions by a participant shall be credited to the participant's individual accounts in the participant contribution fund. A participant's accumulated participant contributions shall be transferred to the member contribution fund pursuant to the Public Employees Retirement Act by the association. Participant contributions are not refundable. Each participant shall be deemed to consent and agree to the deductions made and the transfers made as provided for in this section.

          E. The employer contribution fund is the accounting fund in which shall be accumulated the employer contributions paid by the affiliated public employer on behalf of a participant. The affiliated public employer shall remit its contributions to the association in accordance with procedures and schedules established by the association. The board may assess an interest charge and a penalty charge on any late remittance. Contributions made by an affiliated public employer pursuant to the Deferred Retirement Option Plan Act shall be credited and transferred to the employers accumulation fund provided in the Public Employees Retirement Act.

          F. The participant pension benefit plan fund is the accounting fund in which shall be accumulated participant pension benefit payments paid by the association and credited to a participant's option plan account. The participant pension benefit payment's shall be paid by the association in accordance with the schedule of pension benefit payments paid to retired members as provided pursuant to the Public Employees Retirement Act. Interest shall be earned on each participant's option plan account balance at the rate of five percent annually. The association shall credit, on a quarterly basis, each participant's option plan account with the interest earned.

          G. The disbursement reserve fund is the accounting fund in which shall be transferred the accumulated participant pension benefit payments balance credited to a participant's option plan account and from which shall be paid all disbursement payments to participants after retirement and to survivor beneficiaries and all residual refunds to refund beneficiaries of retired participants and survivor beneficiaries.

          H. An actuarial valuation of the fund shall be completed annually by the board's actuary, and the results of the valuation shall be reported, along with any recommendations deemed appropriate by the board regarding the option plan, no later than November 30 each year to the legislative finance committee and to any appropriate interim legislative committee as directed by the chair of the legislative finance committee.

          I. Each year, following receipt of the report of the annual actuarial valuation, the excess, if any, of the reported actuarial present value of disbursement payments being paid and likely to be paid to retired participants and survivor beneficiaries and residual refunds likely to be paid to refund beneficiaries of retired participants and survivor beneficiaries over the balance in the disbursement reserve fund shall be transferred to the income fund.

          J. The income fund is the accounting fund to which shall be credited all interest, dividends, rents and other income from investments of the fund, all gifts and bequests, all unclaimed participant pension benefit payments and all other money the disposition of which is not specifically provided for in the Deferred Retirement Option Plan Act. Expenses related to the administration of the Deferred Retirement Option Plan Act shall be paid from the income fund.

     SECTION 6. [NEW MATERIAL] DEFERRED RETIREMENT OPTION PLAN PARTICIPATION--ELIGIBILITY APPLICATION--IRREVOCABLE CONSENT.--An individual may participate in the option plan if the individual is a police officer who:

          A. upon the entry date of participation in the option plan, is a member pursuant to the Public Employees Retirement Act and who meets the age and service requirements for normal retirement for the applicable coverage plan under which the member is covered pursuant to that act;

          B. submits to the association, in a form and manner prescribed by the association, an application for participation in the option plan, including with the application:

                (1) verification of the date of eligibility for normal retirement;

                (2) verification of continued employment as a police officer with the affiliated public employer, including the date the continued employment begins; and

                (3) an irrevocable signed consent agreeing to the terms of participation in the option plan as provided in the Deferred Retirement Option Plan Act and pursuant to rules promulgated by the board under that act, including, but not limited to, the requirements that:

                     (a) during the period of continued employment, the participant shall be deemed retired for participant pension benefit payment purposes only, and the participant's pension benefit payment shall be deposited by the association directly to the fund and credited to the participant's option plan account;

                     (b) the participant shall make participant contributions equal to the amount provided pursuant to the coverage plan applicable to the participant's continued employment with the affiliated public employer as provided in the Public Employees Retirement Act;

                     (c) the participant's affiliated public employer shall make the employer contributions pursuant to the coverage plan applicable to the participant's continued employment as provided in the Public Employees Retirement Act;

                     (d) the participant shall not accrue service credit for the period of continued employment with the affiliated public employer;

                     (e) the participant shall no longer be eligible to receive a refund of contributions pursuant to the Public Employees Retirement Act;

                     (f) the pension benefit amount payable to the fund and credited to the participant's option plan account during the period of the participant's continued employment shall be an amount equal to one hundred percent of the pension benefit the participant would have received upon normal retirement under the Public Employees Retirement Act if the participant had retired under the applicable coverage plan on the date the participant instead entered the option plan, including any cost-of-living adjustments made pursuant to that act;

                     (g) the pension benefit amount payable to the participant upon normal retirement shall be calculated based solely on the provisions of the applicable coverage plan under the Public Employees Retirement Act in effect on the date the participant entered the option plan and based upon the participant's service credit accrued as of the last day of the month immediately preceding the date of entry into the option plan and shall not be adjusted further regardless of pay increases or decreases, promotions or demotions, or other events that may occur during the participant's continued employment; and

                     (h) unless otherwise provided in the Deferred Retirement Option Act, upon the participant's termination in the option plan, the participant shall simultaneously retire pursuant to normal retirement under the applicable coverage plan pursuant to the Public Employees Retirement Act effective no later than the last day of the month in which the participant's continued employment terminates, not to exceed sixty consecutive months from the date of entry into the option plan;

          C. receives written confirmation from the association approving the participant's entry into the option plan; and

          D. begins participation in the option plan within fifteen days of the first day of continued employment.

     SECTION 7. [NEW MATERIAL] DEFERRED RETIREMENT OPTION PLAN PARTICIPATION--CONTINUED EMPLOYMENT REQUIREMENTS--DURATION.--

          A. Prior to retirement and after receiving written confirmation from the association approving participation in the option plan, a police officer's entry into the option plan may begin on or after the date the age and service requirements for normal retirement under the applicable coverage plan pursuant to the Public Employees Retirement Act is met, but not later than twenty-eight days from the date the continued employment begins.

          B. An approved application for entry into the option plan is irrevocable; provided, however, that an approved application may be revoked by the applicant no later than one business day prior to the applicant's approved date of entry into the option plan.

          C. Participation in the option plan and the continued employment required under that plan shall consist of consecutive and continuous months of employment from the date the participant enters the option plan, not to exceed sixty consecutive and continuous months.

     SECTION 8. [NEW MATERIAL] DEFERRED RETIREMENT OPTION PLAN--PENSION BENEFIT AMOUNT--DEPOSITED TO ACCOUNT.--

          A. An option plan participant shall not be eligible to receive a refund of member contributions made prior to entry into the option plan under the applicable coverage plan pursuant to the Public Employees Retirement Act.

          B. Upon entry to the option plan, the participant's pension benefit payment shall be deposited by the association directly to the fund and credited to the participant's option plan account. The participant pension benefit amount payable:

                (1) during the participant's continued employment shall be:

                     (a) calculated based on the age and service requirement provisions in effect for the applicable coverage plan under which the participant is eligible to retire as a member pursuant to the Public Employees Retirement Act;

                     (b) calculated based on the service credit accrued by the participant as of the last day of the month immediately preceding the date of entry into the option plan; and

                     (c) an amount equal to one hundred percent of the pension benefit the participant would have received upon normal retirement under the Public Employees Retirement Act if the participant had retired under the applicable coverage plan on the date the participant instead entered the option plan, including any cost-of-living adjustments applicable pursuant to that act; and

                (2) upon the participant's exit from the option plan and simultaneous normal retirement under the applicable coverage plan pursuant to the Public Employees Retirement Act, shall be frozen as calculated pursuant to Paragraph (1) of this subsection and shall not be adjusted further regardless of any increase or decrease in salary, promotion, demotion or other event that may have occurred during the continued employment.

     SECTION 9. [NEW MATERIAL] DEFERRED RETIREMENT OPTION PLAN--BENEFITS PRESERVED.--Except as otherwise provided in the Deferred Retirement Option Plan Act, a participant in the option plan shall have all of the rights, privileges and benefits, including health benefits, and shall be subject to all of the terms and conditions of employment applicable to the affiliated public employer under which the participant has continued employment.

     SECTION 10. [NEW MATERIAL] DEFERRED RETIREMENT OPTION PLAN--TERMINATION OF PARTICIPATION--FORM OF DISBURSEMENT PAYMENT--COMPLIANCE WITH FEDERAL LAW.--

          A. An option plan participant whose continued employment is terminated shall be deemed to have exited the option plan effective on the last day of the month in which continued employment terminates.

          B. Upon exiting the option plan, the participant shall, in a form and manner prescribed by the association, submit written application for a disbursement payment from the participant's option plan account. Such payment shall be:

                (1) a lump-sum payment of the balance in the participant's option account, including credited interest earnings as of the date of termination of continued employment, less any penalties or taxes withheld pursuant to state or federal law;

                (2) a rollover payment of the balance in the participant's option plan account directed to an eligible tax-qualified retirement plan; or

                (3) a combination of a partial rollover distribution directed to a qualified tax retirement plan and a lump-sum payment distribution of the balance in the participant's option plan account.

          C. The board has such powers and duties as required and shall adopt rules to the extent necessary to:

                (1) govern the distribution of participant option plan accounts, including the time period in which a disbursement payment may be made; and

                (2) ensure that the rules promulgated pursuant to the Deferred Retirement Option Plan Act maintain compliance with applicable state and federal laws and regulations.

     SECTION 11. [NEW MATERIAL] DEFERRED RETIREMENT OPTION PLAN--DESIGNATION OF BENEFICIARY.--

          A. A participant in the option plan shall designate in writing, in a form and manner prescribed by the association and at the time of entry into the option plan, a survivor beneficiary for the participant's option plan account. The participant may change the named beneficiary at any time prior to the disbursement payment from the participant's option plan account.

          B. If the participant's designated beneficiary predeceases the participant who dies before designating a new beneficiary, the disbursement payment of the balance in the participant's option plan account shall be made to the estate of the participant.

          C. In the event of a participant's death prior to exiting the option plan, the participant's designated survivor beneficiary may, within one year from the date of the participant's death, provide written application in a form and manner prescribed by the association for a lump-sum disbursement payment in the amount of the balance, including interest credited, in the deceased participant's option plan account and less any taxes or penalties withheld pursuant to state or federal law.

          D. Notwithstanding any provisions of this section, a participant's community property obligations under applicable law shall not be affected by the beneficiary designation.

     SECTION 12. Section 10-11-2 NMSA 1978 (being Laws 1987, Chapter 253, Section 2, as amended) is amended to read:

     "10-11-2. DEFINITIONS.--As used in the Public Employees Retirement Act:

          A. "accumulated member contributions" means the amounts deducted from the salary of a member and credited to the member's individual account, together with interest, if any, credited to that account;

          B. "affiliated public employer" means the state and any public employer affiliated with the association as provided in the Public Employees Retirement Act, but does not include an employer pursuant to the Magistrate Retirement Act, the Judicial Retirement Act or the Educational Retirement Act;

          C. "association" means the public employees retirement association established under the Public Employees Retirement Act;

          D. "continued employment" means the employment of a participant with an affiliated public employer upon the participant's entry into the option plan as provided under the Deferred Retirement Option Plan Act;

          [D.] E. "disability retired member" means a retired member who is receiving a pension pursuant to the disability retirement provisions of the Public Employees Retirement Act;

          [E.] F. "disability retirement pension" means the pension paid pursuant to the disability retirement provisions of the Public Employees Retirement Act;

          [F.] G. "educational retirement system" means that retirement system provided for in the Educational Retirement Act;

          [G.] H. "employee" means any employee of an affiliated public employer;

          [H.] I. "federal social security program" means that program or those programs created and administered pursuant to the act of congress approved August 14, 1935, Chapter 531, 49 Stat. 620, as that act may be amended;

          [I.] J. "final average salary" means the final average salary calculated in accordance with the provisions of the applicable coverage plan;

          [J.] K. "form of payment" means the applicable form of payment of a pension provided for in Section 10-11-117 NMSA 1978;

          [K.] L. "former member" means a person who was previously employed by an affiliated public employer, who has terminated that employment and who has received a refund of member contributions;

          [L.] M. "fund" means the funds included under the Public Employees Retirement Act;

          [M.] N. "member" means a currently employed, contributing employee of an affiliated public employer, or a person who has been but is not currently employed by an affiliated public employer, who has not retired and who has not received a refund of member contributions; "member" also includes the following:

                (1) "adult correctional officer member" means a member who is employed as an adult correctional officer or an adult correctional officer specialist by a state correctional facility of the corrections department or its successor agency;

               (2) "juvenile correctional officer member" means a member who is employed as a juvenile correctional officer by the children, youth and families department or its successor agency;     

                (3) "municipal detention officer member" means a member who is employed by an affiliated public employer other than the state and who has inmate custodial responsibilities at a facility used for the confinement of persons charged with or convicted of a violation of a law or ordinance;

                (4) "municipal fire member" means any member who is employed as a full-time nonvolunteer firefighter by an affiliated public employer and who has taken the oath prescribed for firefighters;

                (5) "municipal police member" means any member who is employed as a police officer by an affiliated public employer, other than the state, and who has taken the oath prescribed for police officers; and

                (6) "state police member" means any member who is an officer of the New Mexico state police and who has taken the oath prescribed for such officers;

          [N.] O. "membership" means membership in the association;

          P. "option plan" means the deferred retirement option plan provided for pursuant to the Deferred Retirement Option Plan Act;

          Q. "participant" means a member who participates in the option plan as provided in the Deferred Retirement Option Plan Act;

          [O.] R. "pension" means a series of monthly payments to a retired member or survivor beneficiary as provided in the Public Employees Retirement Act;

          [P.] S. "public employer" means the state, any municipality, city, county, metropolitan arroyo flood control authority, economic development district, regional housing authority, soil and water conservation district, entity created pursuant to a joint powers agreement, council of government, conservancy district, irrigation district, water and sanitation district, water district and metropolitan water board, including the boards, departments, bureaus and agencies of a public employer, so long as these entities fall within the meaning of governmental plan as that term is used in Section 414(d) of the Internal Revenue Code of 1986, as amended;

          [Q.] T. "refund beneficiary" means a person designated by the member, in writing, in the form prescribed by the association, as the person who would be refunded the member's accumulated member contributions payable if the member dies and no survivor pension is payable or who would receive the difference between pension paid and accumulated member contributions if the retired member dies before receiving in pension payments the amount of the accumulated member contributions;

          [R.] U. "retire" means to:

                (1) terminate employment with all employers covered by any state system or the educational retirement system; and

                (2) receive a pension from a state system or the educational retirement system;

          [S.] V. "retired member" means a person who has met all requirements for retirement and who is receiving a pension from the fund;

          [T.] W. "retirement board" means the retirement board provided for in the Public Employees Retirement Act;

          [U.] X. "salary" means the base salary or wages paid a member, including longevity pay, for personal services rendered an affiliated public employer. "Salary" shall not include overtime pay, allowances for housing, clothing, equipment or travel, payments for unused sick leave, unless the unused sick leave payment is made through continuation of the member on the regular payroll for the period represented by that payment, and any other form of remuneration not specifically designated by law as included in salary for Public Employees Retirement Act purposes. Salary in excess of the limitations set forth in Section 401(a)(17) of the Internal Revenue Code of 1986, as amended, shall be disregarded. The limitation on compensation for eligible employees shall not be less than the amount that was allowed to be taken into account under the state retirement system acts in effect on July 1, 1993. For purposes of this subsection, "eligible employee" means an individual who was a member of a state system before the first plan year beginning after December 31, 1995;

          [V.] Y. "state system" means the retirement programs provided for in the Public Employees Retirement Act, the Magistrate Retirement Act and the Judicial Retirement Act;

          [W.] Z. "state retirement system acts" means collectively the Public Employees Retirement Act, the Magistrate Retirement Act, the Judicial Retirement Act and the Volunteer Firefighters Retirement Act; and

          [X.] AA. "survivor beneficiary" means a person who receives a pension or who has been designated to be paid a pension as a result of the death of a member or retired member."

     SECTION 13. Section 10-11-132 NMSA 1978 (being Laws 1987, Chapter 253, Section 132, as amended) is amended to read:

     "10-11-132. INVESTMENT OF FUNDS--PRUDENT INVESTOR STANDARD--INDEMNIFICATION OF BOARD MEMBERS.--The funds created by the state retirement system acts and the Deferred Retirement Option Plan Act are trust funds of which the retirement board is trustee. Members of the retirement board jointly and individually shall be indemnified by the state from the funds administered by the retirement board from all claims, demands, suits, actions, damages, judgments, costs, charges and expenses, including court costs and attorney fees and against all liability losses and damages of any nature that members shall or may sustain by reason of any decision made in the performance of their duties pursuant to the state retirement system acts. The retirement board shall invest and reinvest the funds in accordance with the Uniform Prudent Investor Act."

     SECTION 14. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2014.

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