00                      CS FOR SENATE BILL NO. 123(FIN)                                                                   
01 "An Act relating to the public employees' and teachers' defined benefit retirement                                      
02 plans; relating to the public employees' and teachers' defined contribution retirement                                  
03 plans; relating to the judicial retirement system; relating to the health reimbursement                                 
04 arrangement plan for certain teachers and public employees; relating to the                                             
05 supplemental employee benefit program; relating to the public employees' deferred                                       
06 compensation program; relating to group insurance for public employees and retirees;                                    
07 making conforming amendments; and providing for an effective date."                                                     
08 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
09    * Section 1. AS 14.25.065(b) is amended to read:                                                                   
10            (b)  The contributions of employers under AS 14.25.070 must be transmitted to                                
11       the plan for deposit in the retirement fund and the Alaska retiree health care trust at                       
12       the close of each pay period. If the contributions are not submitted within the                               
13       prescribed time limit [15 DAYS OF THE CLOSE OF EACH PAYROLL PERIOD],                                          

01       interest must be assessed on the outstanding contributions at one and one-half times                              
02       the most recent actuarially determined rate of earnings for the plan from the date that                           
03       contributions were originally due. [IN ADDITION, THE AMOUNT OF THE                                                
04       CONTRIBUTIONS AND INTEREST MAY BE DEDUCTED BY THE                                                                 
05       DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT FROM THE                                                            
06       STATE FUNDS DUE THE SCHOOL DISTRICT AND THE AMOUNT SO                                                             
07       DEDUCTED TRANSMITTED TO THE PLAN FOR DEPOSIT IN THE                                                               
08       RETIREMENT FUND.] Amounts due from an employer [THE UNIVERSITY OF                                             
09       ALASKA] and interest as prescribed in this section may be claimed [DEDUCTED]                                  
10       by the administrator [COMMISSIONER OF ADMINISTRATION] from any agency                                     
11       of the state or political subdivision that has in its possession funds of the                                 
12       employer or that is authorized to disburse funds to the employer that are not                                 
13       restricted by statute or appropriation to a specific purpose. The amount claimed                              
14       shall be certified by the administrator as sufficient to pay the contributions and                            
15       interest due from the employer. The amount claimed shall be submitted to the                                  
16       administrator for deposit in the retirement fund and the Alaska retiree health                                
17       care trust [STATE FUNDS DUE THE UNIVERSITY OF ALASKA AND THE                                                  
18       AMOUNT DEDUCTED TRANSMITTED TO THE ADMINISTRATOR FOR                                                              
19       DEPOSIT IN THE RETIREMENT FUND].                                                                                  
20    * Sec. 2. AS 14.25.070(a) is amended to read:                                                                      
21            (a)  An employer shall make contributions to the plan in accordance with this                            
22       section and as approved by the board in an amount sufficient, after subtracting                               
23       member contributions, to provide the benefits of AS 14.25.009 - 14.25.220. The                                    
24       amount shall be calculated by applying the sum of the employer normal cost rate                               
25       and the past service rate to the sum total of the base salaries paid to members in                            
26       the system [AN EMPLOYER CONTRIBUTION RATE, CERTIFIED BY THE                                                   
27       BOARD, AGAINST THE SUM TOTAL OF THE BASE SALARIES PAID TO                                                         
28       MEMBERS], including any adjustments to contributions required by AS 14.25.173(a).                                 
29       The employer shall remit this amount to the administrator in accordance with                                  
30       AS 14.25.065.                                                                                                 
31    * Sec. 3. AS 14.25.070 is amended by adding new subsections to read:                                               

01            (d)  Employer contributions shall be separately computed for benefits provided                               
02       by AS 14.25.168, and shall be deposited in the Alaska retiree health care trust                                   
03       established under AS 39.30.097(a).                                                                                
04            (e)  In (a) of this section,                                                                                 
05                 (1)  "employer normal cost rate" means the percentage of compensation                                   
06       of all active members in the system that, when combined with the member                                           
07       contribution rate of active members in the plan, is sufficient to provide the benefits                            
08       that are expected to be credited with respect to service during the year beginning after                          
09       the last valuation date; this percentage is uniformly determined for all employers and                            
10       is applicable to each employer;                                                                                   
11                 (2)  "past service rate" means the percentage of compensation of all                                    
12       active members in the system necessary to provide the annual amount required to                                   
13       amortize the unfunded obligations of the employers for benefits earned by members in                              
14       the plan as of the date of the last actuarial valuation over a period not to exceed the                           
15       maximum period allowed by generally accepted accounting principles of the                                         
16       Governmental Accounting Standards Board; this percentage is uniformly determined                                  
17       for all employers and is applicable to each employer.                                                             
18    * Sec. 4. AS 14.25.075(f) is amended to read:                                                                      
19            (f)  The administrator may accept rollover contributions from a member, and                                  
20       direct transfers as described in this subsection, for the purchase, in whole or in part, of                       
21       forfeited credited service under this section for the reinstatement, in whole or in part,                         
22       of forfeited credited service under AS 14.25.062. Contributions made under this                                   
23       subsection may not be applied to purchase service being paid under (b) of this section.                           
24       A rollover contribution or transfer as described in this subsection shall be treated as                           
25       employer contributions for the purpose of determining tax treatment under the Internal                            
26       Revenue Code and may be made by any one or a combination of the following                                         
27       methods:                                                                                                          
28                 (1)  subject to the limitations prescribed in 26 U.S.C. 402(c), accepting                               
29       eligible rollover distributions directly from one or more eligible retirement plans as                    
30       defined by 26 U.S.C. 402(c)(8)(B) [PROGRAMS OF ANOTHER EMPLOYER                                               
31       THAT ARE QUALIFIED UNDER 26 U.S.C. 401(a) OR ACCEPTING                                                            

01       ROLLOVERS DIRECTLY FROM A MEMBER];                                                                                
02                 (2)  [SUBJECT TO THE LIMITATIONS PRESCRIBED IN 26 U.S.C.                                                
03       408(d)(3)(A)(ii), ACCEPTING FROM A MEMBER CONDUIT ROLLOVER                                                        
04       CONTRIBUTIONS THAT ARE RECEIVED BY THE MEMBER FROM ONE OR                                                         
05       MORE CONDUIT ROLLOVER INDIVIDUAL RETIREMENT ACCOUNTS                                                              
06       PREVIOUSLY ESTABLISHED BY THE MEMBER;                                                                             
07                 (3)]  subject to the limitations prescribed in 26 U.S.C. 403(b)(13),                                    
08       accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the                          
09       member, on or after January 1, 2002, from a tax sheltered annuity described in 26                                 
10       U.S.C. 403(b);                                                                                                    
11                 (3) [(4)]  subject to the limitations prescribed in 26 U.S.C. 457(e)(17),                           
12       accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the                          
13       member, on or after January 1, 2002, from an eligible deferred compensation plan of a                             
14       tax-exempt organization or a state or local government described in 26 U.S.C. 457(b);                             
15                 (4) [(5)]  accepting direct trustee-to-trustee transfer from an account                             
16       established for the benefit of the member in AS 39.30.150 - 39.30.180 (Alaska                                     
17       Supplemental Annuity Plan).                                                                                       
18    * Sec. 5. AS 14.25.075(f) is amended to read:                                                                      
19            (f)  The administrator may accept rollover contributions from a member [,                                    
20       AND DIRECT TRANSFERS AS DESCRIBED IN THIS SUBSECTION, FOR THE                                                     
21       PURCHASE, IN WHOLE OR IN PART, OF FORFEITED CREDITED SERVICE                                                      
22       UNDER THIS SECTION FOR THE REINSTATEMENT, IN WHOLE OR IN PART,                                                    
23       OF FORFEITED CREDITED SERVICE UNDER AS 14.25.062]. Contributions made                                             
24       under this subsection may not be applied to purchase service being paid under (b) of                              
25       this section. A rollover contribution [OR TRANSFER] as described in this subsection                               
26       shall be treated as employer contributions for the purpose of determining tax treatment                           
27       under the Internal Revenue Code and may be made by any one or a combination of the                                
28       following methods:                                                                                                
29                 (1)  subject to the limitations prescribed in 26 U.S.C. 402(c), accepting                               
30       eligible rollover distributions directly from one or more eligible retirement plans as                            
31       defined by 26 U.S.C. 402(c)(8)(B);                                                                                

01                 (2)  subject to the limitations prescribed in 26 U.S.C. 403(b)(13),                                     
02       accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the                          
03       member, on or after January 1, 2002, from a tax sheltered annuity described in 26                                 
04       U.S.C. 403(b);                                                                                                    
05                 (3)  subject to the limitations prescribed in 26 U.S.C. 457(e)(17),                                     
06       accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the                          
07       member, on or after January 1, 2002, from an eligible deferred compensation plan of a                             
08       tax-exempt organization or a state or local government described in 26 U.S.C. 457(b);                             
09                 (4)  accepting direct trustee-to-trustee transfer from an account                                       
10       established for the benefit of the member in AS 39.30.150 - 39.30.180 (Alaska                                     
11       Supplemental Annuity Plan).                                                                                       
12    * Sec. 6. AS 14.25.125(c) is amended to read:                                                                      
13            (c)  Membership service for which contributions were refunded is not                                         
14       creditable under this section [UNLESS THE REFUNDED CONTRIBUTIONS HAVE                                             
15       BEEN REPAID. FOR PURPOSES OF THIS SECTION, A MEMBER OR FORMER                                                     
16       MEMBER DOES NOT HAVE TO BE REEMPLOYED UNDER THIS PLAN IN                                                          
17       ORDER TO REPAY REFUNDED CONTRIBUTIONS. COMPOUND INTEREST                                                          
18       AT THE RATE PRESCRIBED BY REGULATION MUST BE ADDED TO THE                                                         
19       REINSTATEMENT INDEBTEDNESS FROM THE DATE OF THE REFUND TO                                                         
20       THE DATE OF REPAYMENT].                                                                                           
21    * Sec. 7. AS 14.25.163(b) is amended to read:                                                                      
22            (b)  Except as provided by AS 14.25.075(f) [AS 14.25.075(f)(5)], the plan does                           
23       not accept contributions of eligible rollover distributions.                                                      
24    * Sec. 8. AS 14.25.163(c)(2) is amended to read:                                                                   
25                 (2)  "distributee" means a member or a beneficiary who is the surviving                                 
26       spouse of the member or an alternate payee;                                                                   
27    * Sec. 9. AS 14.25.163(c)(3) is amended to read:                                                                   
28                 (3)  "eligible retirement plan"                                                                         
29                      [(A)]  means                                                                                       
30                      (A) [(i)]  an individual retirement account described in 26                                    
31            U.S.C. 408(a);                                                                                               

01                      (B) [(ii)]  an individual retirement annuity defined in 26 U.S.C.                              
02            408(b);                                                                                                      
03                      (C) [(iii)]  an annuity plan described in 26 U.S.C. 403(a);                                    
04                      (D) [(iv)]  a qualified trust described in 26 U.S.C. 401(a);                                   
05                      (E) [(v)]  on and after January 1, 2002, an annuity plan                                       
06            described in 26 U.S.C. 403(b); [OR]                                                                          
07                      (F) [(vi)]  on or after January 1, 2002, a governmental plan                                   
08            described in 26 U.S.C. 457(b); or                                                                        
09                      (G)  on or after January 1, 2008, a Roth IRA described in 26                                   
10            U.S.C. 408A [AND                                                                                         
11                      (B)  NOTWITHSTANDING (A) OF THIS PARAGRAPH,                                                        
12            MEANS, WITH RESPECT TO DISTRIBUTIONS MADE BEFORE                                                             
13            JANUARY 1, 2002, AN INDIVIDUAL RETIREMENT ACCOUNT OR AN                                                      
14            INDIVIDUAL RETIREMENT ANNUITY ACCOUNT DESCRIBED OR                                                           
15            DEFINED IN 26 U.S.C. 408 IN THE CASE OF AN ELIGIBLE ROLLOVER                                                 
16            DISTRIBUTION TO A BENEFICIARY WHO IS THE SURVIVING                                                           
17            SPOUSE OF A MEMBER];                                                                                         
18    * Sec. 10. AS 14.25.163(c)(4) is amended to read:                                                                  
19                 (4)  "eligible rollover distribution" means a distribution of all or part of                            
20       a total account to a distributee, except for                                                                      
21                      (A)  a distribution that is one of a series of substantially equal                                 
22            installments payable not less frequently than annually over the life expectancy                              
23            of the distributee or the joint and last survivor life expectancy of the distributee                         
24            and the distributee's designated beneficiary, as defined in 26 U.S.C. 401(a)(9);                             
25                      (B)  a distribution that is one of a series of substantially equal                                 
26            installments payable not less frequently than annually over a specified period                               
27            of 10 years or more;                                                                                         
28                      (C)  a distribution that is required under 26 U.S.C. 401(a)(9);                                    
29                      (D)  the portion of any distribution that is not includable in                                     
30            gross income; however, a portion under this subparagraph may be                                          
31            transferred only to an individual retirement account or annuity described                                

01            in 26 U.S.C. 408(a) or (b), to a qualified plan described in 26 U.S.C. 401(a)                            
02            or 403(a), or to an annuity contract described in 26 U.S.C. 403(b), that                                 
03            agrees to separately account for amounts transferred, including separately                               
04            accounting for the portion of the distribution that is includable in gross                               
05            income and the portion of the distribution that is not includable in gross                               
06            income; and                                                                                              
07                      (E)  [A DISTRIBUTION MADE ON OR AFTER JANUARY                                                      
08            1, 2002, THAT IS ON ACCOUNT OF HARDSHIP; AND                                                                 
09                      (F)]  other distributions that are reasonably expected to total less                               
10            than $200 during a year.                                                                                     
11    * Sec. 11. AS 14.25.168 is amended by adding a new subsection to read:                                             
12            (f)  On and after July 1, 2007, benefits under this section shall be provided in                             
13       part by the Alaska retiree health care trust established under AS 39.30.097(a).                                   
14    * Sec. 12. AS 14.25.181(b) is amended to read:                                                                     
15            (b)  If, upon termination of the plan, all liabilities are satisfied, any excess                             
16       assets [ARISING FROM ERRONEOUS ACTUARIAL COMPUTATION] shall                                                       
17       revert to the employers as determined by the administrator subject to the approval                            
18       of the termination by the Internal Revenue Service [ON A PRO RATA BASIS].                                     
19    * Sec. 13. AS 14.25.181 is amended by adding new subsections to read:                                              
20            (c)  The administrator shall use forfeitures that arise for any reason, including                            
21       from termination of employment or death, to reduce employer contributions.                                        
22       Forfeitures may not be applied to increase the benefits of any member.                                            
23            (d)  The administrator shall determine the amount of any benefit that is                                     
24       determined on the basis of actuarial tables using assumptions approved by the                                     
25       commissioner. The amount of benefits is not subject to employer discretion.                                       
26            (e)  Employee contributions paid to, and retirement benefits paid from, the plan                             
27       may not exceed the annual limits on contributions and benefits, respectively, allowed                             
28       by 26 U.S.C. 415. Notwithstanding any contrary provision of law, the administrator                                
29       may modify a request by a member to make a contribution to the plan if the amount of                              
30       the contribution would exceed the limits provided in 26 U.S.C. 415 by using the                                   
31       following methods:                                                                                                

01                 (1)  if the law requires a lump sum payment for the purchase of service                                 
02       credit, the administrator may establish a periodic payment plan for the member to                                 
03       avoid a contribution in excess of the limits under 26 U.S.C. 415(c) or (n);                                       
04                 (2)  if a periodic payment plan under (1) of this subsection will not                                   
05       avoid a contribution in excess of the limits imposed by 26 U.S.C. 415(c), the                                     
06       administrator may either reduce the member's contribution to an amount within the                                 
07       limits of that section or refuse the member's contribution.                                                       
08    * Sec. 14. AS 14.25.220(10) is amended to read:                                                                    
09                 (10)  "compensation" means the total remuneration paid under contract                                   
10       to a member for services rendered during a school year, including cost-of-living                                  
11       differentials, payments for leave that is actually used by the member, the amount by                              
12       which the member's wages are reduced under AS 39.30.150(c), an amount that is                                 
13       contributed by the employer under a salary reduction agreement and that is not                                
14       includable in the gross income of the employee under 26 U.S.C. 125 or 132(f)(4),                              
15       and the amount deferred under an employer-sponsored deferred compensation plan or                                 
16       the tax shelter annuity plan approved by the Department of Education and Early                                    
17       Development, but does not include retirement benefits, welfare benefits, per diem,                                
18       expense allowances, workers' compensation payments, or payments for leave not used                                
19       by the member, whether those leave payments are scheduled payments, lump-sum                                      
20       payments, donations, or cash-ins; for purposes of AS 14.25.050, compensation paid                                 
21       includes any payment made after June 30 of a school year for services rendered before                             
22       the end of the school year;                                                                                       
23    * Sec. 15. AS 14.25.220(16) is amended to read:                                                                    
24                 (16)  "employer" means a public school district, the Board of Regents                                   
25       of the University of Alaska, the Department of Education and Early Development,                                   
26       [THE NATIONAL EDUCATION ASSOCIATION OF ALASKA,] the Regional                                                      
27       Resource Centers, or the state legislature with respect to a state legislator who elects                          
28       membership under AS 14.25.040(b);                                                                                 
29    * Sec. 16. AS 14.25.310 is amended to read:                                                                        
30            Sec. 14.25.310. Applicability of AS 14.25.310 - 14.25.590. The provisions of                               
31       AS 14.25.310 - 14.25.590 apply only to teachers who first become members on or                                    

01       after July 1, 2006, to members who are employed by employers that do not                                      
02       participate in the defined benefit retirement plan established under AS 14.25.009                             
03       - 14.25.220, or to members who transfer into the defined contribution retirement plan                     
04       under AS 14.25.540.                                                                                               
05    * Sec. 17. AS 14.25.310 is amended to read:                                                                        
06            Sec. 14.25.310. Applicability of AS 14.25.310 - 14.25.590. The provisions of                               
07       AS 14.25.310 - 14.25.590 apply only to teachers who first become members on or                                    
08       after July 1, 2006, to members who are employed by employers that do not participate                              
09       in the defined benefit retirement plan established under AS 14.25.009 - 14.25.220,                                
10       former members under AS 14.25.220, or to members who transfer into the defined                                
11       contribution retirement plan under AS 14.25.540.                                                                  
12    * Sec. 18. AS 14.25.320(c) is amended to read:                                                                     
13            (c)  The defined contribution retirement plan is intended to qualify under 26                                
14       U.S.C. 401(a), and 414(d), and 414(k) (Internal Revenue Code) as a qualified                              
15       retirement plan established and maintained by the state for its employees and for the                             
16       employees of school districts and regional educational attendance areas in the state.                             
17       Benefits under AS 14.25.480 are not provided by the defined contribution                                      
18       retirement plan.                                                                                              
19    * Sec. 19. AS 14.25.350(b) is amended to read:                                                                     
20            (b)  An employer shall also contribute an amount equal to a percentage, as                                   
21       approved [CERTIFIED] by the board, of each member's compensation from July 1 to                               
22       the following June 30 to pay for retiree major medical insurance. This contribution                               
23       shall be paid into the Alaska retiree health care trust [GROUP HEALTH AND                                     
24       LIFE BENEFITS FUND] established by the commissioner of administration under                                       
25       AS 39.30.097(b) [AS 39.30.095] and shall be accounted for in accordance with                                  
26       regulations adopted [ESTABLISHED] by the commissioner.                                                        
27    * Sec. 20. AS 14.25.350 is amended by adding a new subsection to read:                                             
28            (e)  An employer shall make annual contributions to a trust account in the plan,                             
29       applied as a percentage of each member's compensation from July 1 to the following                                
30       June 30, in an amount determined by the board to be actuarially required to fully fund                            
31       the cost of providing occupational disability and occupational death benefits under                               

01       AS 14.25.310 - 14.25.590.                                                                                         
02    * Sec. 21. AS 14.25.360(d)(3) is amended to read:                                                                  
03                 (3)  "eligible retirement plan" means                                                                   
04                      (A)  an [A CONDUIT] individual retirement account described                                    
05            in 26 U.S.C. 408(d)(3)(A);                                                                                   
06                      (B)  an annuity plan described in 26 U.S.C. 403(a);                                                
07                      (C)  a qualified trust described in 26 U.S.C. 401(a);                                              
08                      (D)  an annuity plan described in 26 U.S.C. 403(b); [OR]                                           
09                      (E)  a governmental plan described in 26 U.S.C. 457(b);                                            
10                      (F)  an individual retirement annuity described in 26 U.S.C.                                   
11            408(b); or                                                                                               
12                      (G)  on or after January 1, 2008, a Roth IRA described in 26                                   
13            U.S.C. 408A;                                                                                             
14    * Sec. 22. AS 14.25.360(d)(4) is amended to read:                                                                  
15                 (4)  "eligible rollover distribution" means a distribution of all or part of                            
16       a total account to a distributee, except for                                                                      
17                      (A)  a distribution that is one of a series of substantially equal                                 
18            installments payable not less frequently than annually over the life expectancy                              
19            of the distributee or the joint and last survivor life expectancy of the distributee                         
20            and the distributee's designated beneficiary, as defined in 26 U.S.C. 401(a)(9);                             
21                      (B)  a distribution that is one of a series of substantially equal                                 
22            installments payable not less frequently than annually over a specified period                               
23            of 10 years or more;                                                                                         
24                      (C)  a distribution that is required under 26 U.S.C. 401(a)(9);                                    
25                      (D)  the portion of any distribution that is not includable in                                     
26            gross income; however, a portion under this subparagraph may be                                          
27            transferred only to an individual retirement account or annuity described                                
28            in 26 U.S.C. 408(a) or (b), to a qualified plan described in 26 U.S.C. 401(a)                            
29            or 403(a), or to an annuity contract described in 26 U.S.C. 403(b), that                                 
30            agrees to separately account for amounts transferred, including separately                               
31            accounting for the portion of the distribution that is includable in gross                               

01            income and the portion of the distribution that is not includable in gross                               
02            income; and                                                                                              
03                      (E)  [A DISTRIBUTION THAT IS ON ACCOUNT OF                                                         
04            HARDSHIP; AND                                                                                                
05                      (F)]  other distributions that are reasonably expected to total less                               
06            than $200 during a year.                                                                                     
07    * Sec. 23. AS 14.25.370 is amended to read:                                                                        
08            Sec. 14.25.370. Transmittal of contributions. All contributions deducted in                                
09       accordance with AS 14.25.310 - 14.25.590 shall be transmitted to the plan for deposit                             
10       in the appropriate account or trusts [TRUST FUND] as soon as administratively                                 
11       feasible, but in no event later than 15 days following the close of the payroll period,                       
12       with the final contributions due for any school year transmitted no later than                                
13       July 15.                                                                                                      
14    * Sec. 24. AS 14.25.370 is amended by adding new subsections to read:                                              
15            (b)  If contributions are not transmitted within the prescribed time limit,                                  
16       interest shall be assessed on the outstanding contributions at the rate established under                         
17       AS 14.25.065 from the date that contributions were originally due. Amounts due from                               
18       an employer and interest as prescribed in this subsection may be claimed by the                                   
19       administrator from any agency of the state or political subdivision that has in its                               
20       possession funds of the employer or that is authorized to disburse funds to the                                   
21       employer that are not restricted by statute or appropriation to a specific purpose. The                           
22       amount claimed shall be certified by the administrator as sufficient to pay the                                   
23       contributions and interest due from the employer. The amount claimed shall be                                     
24       submitted to the administrator for deposit in the appropriate account or trusts.                                  
25            (c)  An employer is responsible for administrative fees, investment fees, and                                
26       investment losses charged to accounts established under AS 14.25.340 resulting from                               
27       contribution adjustments because the employer enrolled a member in the plan before                                
28       the member was eligible for membership. Contributions made by an employee shall be                                
29       returned to the employer by reducing future employee contributions due.                                           
30       Contributions, net of fees and investment losses, made by an employer shall be used to                            
31       reduce future employer contributions due.                                                                         

01    * Sec. 25. AS 14.25.380 is amended to read:                                                                        
02            Sec. 14.25.380. Limitations on contributions and benefits. Notwithstanding                               
03       any other provisions of this plan, the annual additions to each member's individual                               
04       account under this plan and under all defined contribution plans of the employer                                  
05       required to be aggregated with the contributions from this plan under the provisions of                           
06       26 U.S.C. 415 may not exceed, for any limitation year, the amount permitted under 26                          
07       U.S.C. 415(c) [26 U.S.C. 415] at any time. If the amount of a member's individual                         
08       account [DEFINED CONTRIBUTION PLAN] contributions exceeds the limitation of                                   
09       26 U.S.C. 415(c) for any limitation year, the administrator shall take any necessary                              
10       remedial action to correct an excess contribution. A fixed benefit provided under                             
11       this plan may not exceed, for or during a limitation year, the amount permitted                               
12       under 26 U.S.C. 415(b). If a fixed benefit provided under this plan exceeds, for or                           
13       during a limitation year, the amount permitted under 26 U.S.C. 415(b), the                                    
14       administrator shall take remedial action necessary to comply with the limits on                               
15       the benefit amount in 26 U.S.C. 415(b). The provisions of 26 U.S.C. 415, and the                              
16       regulations adopted under that statute, as applied to qualified [DEFINED                                          
17       CONTRIBUTION] plans of governmental employers [EMPLOYEES] are                                                 
18       incorporated as part of the terms and conditions of the plan.                                                     
19    * Sec. 26. AS 14.25.485(b) is amended to read:                                                                     
20            (b)  The occupational disability benefits accrue beginning the first day of the                              
21       month following termination of employment as a result of the disability and are                                   
22       payable the last day of the month. If a final determination granting the benefit is not                           
23       made in time to pay the benefit when due, a retroactive payment shall be made to                                  
24       cover the period of deferment. The last payment shall be for the first month in which                             
25       the disabled member                                                                                               
26                 (1)  dies;                                                                                              
27                 (2)  recovers from the disability;                                                                      
28                 (3)  fails to meet the requirements under (f), [OR] (h), or (j) of this                         
29       section; or                                                                                                       
30                 (4)  reaches normal retirement age.                                                                     
31    * Sec. 27. AS 14.25.485(d) is amended to read:                                                                     

01            (d)  The monthly amount of an occupational disability benefit is 40 percent of                               
02       the disabled member's gross monthly compensation at the time of termination due to                                
03       disability. Notwithstanding AS 14.25.390(b), at the time a member is appointed to                             
04       disability, the member becomes fully vested in the employer contributions made                                
05       under AS 14.25.350(a). A disabled member is fully vested in the contributions to                              
06       the member's individual account made under this subsection. A member is not                                   
07       entitled to elect distributions from the member's individual contribution account                             
08       under AS 14.25.410 while the member is receiving disability benefits under this                               
09       section. While a member is receiving disability benefits, based on the disabled                               
10       member's gross monthly compensation at the time of termination due to disability, the                             
11       employer shall make contributions to the                                                                          
12                 (1)  member's individual account under AS 14.25.340 on behalf of the                                    
13       member, without deduction from the member's disability payments; and                                              
14                 (2)  appropriate accounts and funds on behalf of the member under                                       
15       AS 14.25.350.                                                                                                     
16    * Sec. 28. AS 14.25.485(g) is amended to read:                                                                     
17            (g)  A disabled member's occupational disability benefit terminates the last                             
18       day of the month in which [WHEN] the disabled member first qualifies [ATTAINS                             
19       ELIGIBILITY] for normal retirement. At that time, the member's retirement benefit                                 
20       shall be determined under the provisions of AS 14.25.420 - 14.25.440, 14.25.470, and                              
21       14.25.480. A member whose occupational disability benefit terminates under this                               
22       subsection [RECEIVING DISABILITY BENEFITS UP UNTIL ELIGIBILITY FOR                                            
23       RETIREMENT] shall be considered to have retired directly from the plan.                                           
24    * Sec. 29. AS 14.25.485(i) is amended to read:                                                                     
25            (i)  Upon the death of a disabled member who is receiving or is entitled to                                  
26       receive an occupational disability benefit, the administrator shall pay the surviving                             
27       spouse a surviving spouse's pension, equal to 40 percent of the member's monthly                                  
28       compensation at the time of termination of employment because of occupational                                 
29       disability. If there is no surviving spouse, the administrator shall pay the survivor's                           
30       pension in equal parts to the dependent children of the member. While the monthly                             
31       survivor's pension is being paid, the survivor is not entitled to elect distributions                         

01       from the employee's individual contribution account under AS 14.25.410. The                                   
02       first payment of the surviving spouse's pension or of a dependent child's pension shall                           
03       accrue from the first day of the month following the member's death and is payable the                            
04       last day of the month. The last payment shall be made the last day of [FOR] the last                          
05       month in which there is an eligible surviving spouse or dependent child, or the last                      
06       day of the month in which the member would have first qualified for normal                                    
07       retirement if the member had survived, whichever day comes sooner. A                                          
08       retirement benefit shall be determined under the provisions of AS 14.25.420 -                                 
09       14.25.440, 14.25.470, and 14.25.480 based on [. ON] the date the member would                             
10       have first qualified for normal retirement [OF THE MEMBER WOULD HAVE                                          
11       OCCURRED] if the member had survived. In addition to the payment of the                                       
12       member's individual account, the surviving spouse or, if there is no surviving                                
13       spouse, the surviving dependent children of the member, shall receive an                                      
14       additional benefit in an amount equal to the accumulated contributions that                                   
15       would have been made to the deceased member's individual account under                                        
16       AS 14.25.340(a) and 14.25.350(a), based on the deceased member's gross monthly                                
17       compensation at the time of occupational disability, from the time of the                                     
18       member's death to the date the member would have first qualified for normal                                   
19       retirement if the member had survived. Earnings shall be allocated to the                                     
20       additional benefit calculated under this subsection based on the actual rate of                               
21       return, net of expenses, of the trust account established under AS 14.25.350(e)                               
22       over the period that the contributions would have been made. This additional                                  
23       amount and allocated earnings shall be paid in the same manner as determined                                  
24       for the member's individual account under AS 14.25.420 - 14.25.460 to the extent                              
25       permitted by the Internal Revenue Service. For the purpose of determining                                     
26       eligibility of a survivor who is receiving a benefit under this subsection for                                
27       medical benefits under AS 14.25.470 and 14.25.480, a [LIVED, THE                                              
28       RETIREMENT BENEFIT SHALL BE DETERMINED UNDER THE PROVISIONS                                                       
29       OF AS 14.25.420 - 14.25.440, 14.25.470, AND 14.25.480. A] member who died                                         
30       while receiving disability benefits shall be considered to have retired directly from the                         
31       plan on the date the member would have first qualified for normal retirement [OF                              

01       THE MEMBER WOULD HAVE OCCURRED] if the member had survived. The                                               
02       period during which the member was eligible for a disability benefit and the                                  
03       period during which a survivor's pension is paid to a survivor under this                                     
04       subsection each constitute membership service for the purposes of determining                                 
05       eligibility for medical benefits under this chapter and AS 39.30.300 - 39.30.495                              
06       [LIVED].                                                                                                          
07    * Sec. 30. AS 14.25.485(j) is amended to read:                                                                     
08            (j)  In this section, "occupational disability" means a physical or mental                               
09       condition that the administrator determines presumably permanently prevents                                   
10       an employee from satisfactorily performing the employee's usual duties or the                                 
11       duties of another comparable position or job available to the employee and for                                
12       which the employee is qualified by training or education; however, the proximate                              
13       cause of the condition must be a bodily injury sustained, or a hazard undergone,                              
14       while in the performance and within the scope of the employee's duties and not                                
15       the proximate result of the wilful negligence of the employee [HAS THE                                        
16       MEANING GIVEN IN AS 39.35.680].                                                                                   
17    * Sec. 31. AS 14.25.485 is amended by adding a new subsection to read:                                             
18            (k)  While a survivor under (i) of this section is receiving a survivor's pension,                           
19       the employer of the deceased member shall make contributions with respect to the                                  
20       survivor based on the deceased member's gross monthly compensation at the time of                                 
21       termination due to disability                                                                                     
22                 (1)  that would have been paid to the member's individual account                                       
23       under AS 14.25.340 and 14.25.350(a), to the trust account established under                                       
24       AS 14.25.350(e), without deduction from the survivor's pension; and                                               
25                 (2)  to the appropriate accounts and funds under AS 14.25.350(b) - (e).                                 
26    * Sec. 32. AS 14.25 is amended by adding a new section to read:                                                    
27            Sec. 14.25.486. Disability benefit adjustment. (a) Once each year, the                                     
28       administrator shall increase disability benefits. The amount of the increase is a                                 
29       percentage of the current disability benefit equal to the lesser of 75 percent of the                             
30       increase in the cost of living in the preceding calendar year or nine percent.                                    
31            (b)  If a disabled member was not receiving a benefit during the entire                                      

01       preceding calendar year, the increase in the benefit under this section shall be adjusted                         
02       by multiplying it by a fraction, the numerator of which is the number of months for                               
03       which the benefit was received in the preceding calendar year and the denominator of                              
04       which is 12.                                                                                                      
05            (c)  An increase in benefit payments under this section is effective July 1 of                               
06       each year and is based on the percentage increase in the Consumer Price Index for                                 
07       urban wage earners and clerical workers for Anchorage, Alaska, during the previous                                
08       calendar year, as determined by the United States Department of Labor, Bureau of                                  
09       Labor Statistics.                                                                                                 
10            (d)  Benefit adjustments under this section shall terminate the last day of the                              
11       month following the date on which a disabled member is no longer receiving a                                      
12       disability benefit under AS 14.25.485.                                                                            
13    * Sec. 33. AS 14.25.487(b) is amended to read:                                                                     
14            (b)  The first payment of the surviving spouse's pension or of a dependent                                   
15       child's pension shall be made for the month following the month in which the member                               
16       dies. Payments [, AND PAYMENT] shall cease on the last day of the month in                                
17       which there is no longer an eligible spouse or eligible dependent child, or the last                          
18       day of the month following the earliest date [TO BE MADE BEGINNING WITH                                       
19       THE MONTH IN WHICH] the member would have first qualified for normal                                          
20       retirement if the member had survived, whichever day is sooner.                                               
21    * Sec. 34. AS 14.25.487(c) is amended to read:                                                                     
22            (c)  The monthly survivor's pension in (b) of this section for survivors of                                  
23       members is 40 percent of the member's monthly compensation in the month in which                                  
24       the member dies. While the monthly survivor's pension is being paid, the survivor                             
25       is not entitled to elect distributions from the member's individual contribution                              
26       account under AS 14.25.410, except as required by AS 14.25.440. While the                                     
27       monthly survivor's pension is being paid, the employer shall make contributions with                          
28       respect to [ON BEHALF OF] the member's surviving spouse and member's                                      
29       surviving dependent children [BENEFICIARIES] based on the deceased member's                                   
30       gross monthly compensation at the time of occupational death                                                      
31                 (1)  that would have been paid to the member's individual account                                   

01       under AS 14.25.340 and AS 14.25.350(a), to the trust account established under                                
02       AS 14.25.350(e), without deduction from the survivor's pension; and                                           
03                 (2)  to the appropriate accounts and funds [ON BEHALF OF THE                                            
04       MEMBER] under AS 14.25.350(b) - (e) [AS 14.25.350].                                                           
05    * Sec. 35. AS 14.25.487(e) is amended to read:                                                                     
06            (e)  On the date the member would have first qualified for normal retirement                             
07       [OF THE MEMBER WOULD HAVE OCCURRED] if the member had survived                                                
08       [LIVED], the retirement benefit shall be determined under the provisions of                                     
09       AS 14.25.420 - 14.25.440, 14.25.470, and 14.25.480. In addition to payment of the                             
10       member's individual account, the surviving spouse or, if there is no surviving                                
11       spouse, the surviving dependent children of the member, shall receive an                                      
12       additional benefit in an amount equal to the accumulated contributions that                                   
13       would have been made to the deceased member's individual account under                                        
14       AS 14.25.340(a) and 14.25.350(a), based on the deceased member's gross monthly                                
15       compensation at the time of the member's occupational death, from the time of                                 
16       the member's death to the date the member would have first qualified for normal                               
17       retirement if the member had survived. Earnings shall be allocated to the                                     
18       additional benefit calculated under this subsection based on the actual rate of                               
19       return, net of expenses, of the trust account established under AS 14.25.350(e)                               
20       over the period that the contributions would have been made. This additional                                  
21       amount and allocated earnings shall be paid in the same manner as determined                                  
22       for the member's individual account under AS 14.25.420 - 14.25.460 to the extent                              
23       permitted by the Internal Revenue Service. A member who died and whose                                        
24       survivors receive occupational death benefits under this section shall be considered to                           
25       have retired directly from the plan on the date the [NORMAL RETIREMENT OF                                         
26       THE] member would have first qualified for normal retirement [OCCURRED] if                                    
27       the member had survived. The period of time during which a survivor's pension is                              
28       paid under this subsection constitutes membership service for the purposes of                                 
29       determining vesting in employer contributions under AS 14.25.390(b) and                                       
30       eligibility for medical benefits under this chapter and AS 39.30.300 - 39.30.495                              
31       [LIVED].                                                                                                        

01    * Sec. 36. AS 14.25 is amended by adding new sections to read:                                                     
02            Sec. 14.25.488. Survivors' pension adjustment. (a) Once each year, the                                     
03       administrator shall increase payments to a person 60 years of age or older receiving a                            
04       survivor's pension under AS 14.25.485(i) or 14.25.487(c) and to a person who has                                  
05       received a survivor's pension under AS 14.25.485(i) or 14.25.487(c) for at least eight                            
06       years, who is not otherwise eligible for an increase under this section.                                          
07            (b)  The amount of the increase is a percentage of the current survivor's                                    
08       pension equal to the lesser of 50 percent of the increase in the cost of living in the                            
09       preceding calendar year or six percent.                                                                           
10            (c)  If a survivor was not receiving a pension during the entire preceding                                   
11       calendar year, the increase in the survivor's pension under this section shall be                                 
12       adjusted by multiplying it by a fraction, the numerator of which is the number of                                 
13       months for which the pension was received in the preceding calendar year and the                                  
14       denominator of which is 12.                                                                                       
15            (d)  The administrator shall increase the initial survivor's pension paid to a                               
16       survivor of a member who died while receiving disability benefits by a percentage                                 
17       equal to the total cumulative percentage that has been applied to the member's                                    
18       disability benefit under AS 14.25.486.                                                                            
19            (e)  An increase in benefit payments under this section is effective July 1 of                               
20       each year and is based on the percentage increase in the Consumer Price Index for                                 
21       urban wage earners and clerical workers for Anchorage, Alaska, during the previous                                
22       calendar year, as determined by the United States Department of Labor, Bureau of                                  
23       Labor Statistics.                                                                                                 
24            (f)  Pension adjustments under this section shall terminate the last day of the                              
25       month following the date on which a survivor is no longer receiving a survivor's                                  
26       pension under AS 14.25.485(i) or 14.25.487(c).                                                                    
27            Sec. 14.25.489. Premiums for retiree major medical insurance coverage                                      
28       upon termination of disability benefits or survivor's pension. The premium for                                  
29       retiree major medical insurance coverage payable by a member whose disability                                     
30       benefit is terminated under AS 14.25.485(g) or by an eligible survivor whose survivor                             
31       pension is terminated under AS 14.25.485(i) or 14.25.487(e) when the member would                                 

01       have been eligible for normal retirement if the member had survived shall be                                      
02       determined under AS 14.25.480(g)(2) as if the member or survivor were eligible for                                
03       Medicare.                                                                                                         
04    * Sec. 37. AS 14.25.500 is amended by adding new subsections to read:                                              
05            (d)  The administrator shall use forfeitures in the fixed benefit account of the                             
06       plan that arise for any reason, including from termination of employment or death, to                             
07       reduce employer contributions. Forfeitures may not be applied to increase the benefits                            
08       of any member.                                                                                                    
09            (e)  The administrator shall determine the amount of any fixed benefit that is                               
10       determined on the basis of actuarial tables using assumptions approved by the                                     
11       commissioner. The amount of benefits is not subject to employer discretion.                                       
12    * Sec. 38. AS 14.25.510 is amended to read:                                                                        
13            Sec. 14.25.510. Nonguarantee of returns, rates, or benefit amounts. The                                    
14       plan created by AS 14.25.310 - 14.25.590 is, with respect to individual accounts,                             
15       treated as a defined contribution plan, and not a defined benefit plan. The amount of                     
16       money in the individual account of a participant depends on the amount of                                     
17       contributions and the rate of return from investments of the account that varies over                             
18       time. If benefits are paid in the form of an annuity, the benefit amount payable is                               
19       dependent on the amount of money in the account and the interest rates applied and                                
20       service fees charged by the annuity payor at the time the annuity is purchased from                           
21       the carrier and benefits are first paid. Nothing in this plan guarantees a participant                        
22                 (1)  a rate of return or interest rate other than that actually earned by the                           
23       account of the participant, less applicable administrative expenses; or                                           
24                 (2)  an annuity based on interest rates or service charges other than                                   
25       interest rates available from and service charges by the annuity payor in effect at the                           
26       time the annuity is paid.                                                                                         
27    * Sec. 39. AS 14.25.540(c) is amended to read:                                                                     
28            (c)  Each eligible member who elects to participate in the defined contribution                              
29       retirement plan shall have transferred to a new account the member contribution                                   
30       account balance held in trust for the member under the defined benefit retirement plan                            
31       of the teachers' retirement system. A matching employer contribution shall be made on                             

01       behalf of that employee to the new account. The employer shall make the matching                                  
02       contribution from funds other than the trust funds of the defined benefit retirement                              
03       plan. The amount of the matching employer contribution is subject to, and may                                 
04       not exceed, the limitation of 26 U.S.C. 415(c) during the applicable limitation                               
05       year as defined in AS 14.25.590. If the matching employer contribution would                                  
06       exceed the limits during the limitation year in which the transfer occurs, the                                
07       remaining amount of the matching employer contribution shall be made in the                                   
08       next limitation year, if the limits would not be exceeded.                                                    
09    * Sec. 40. AS 14.25.540(d) is amended to read:                                                                     
10            (d)  Upon a transfer, all membership service previously earned under the                                     
11       defined benefit retirement plan shall be nullified for purposes of entitlement to a future                        
12       benefit under the defined benefit retirement plan but shall be credited for purposes of                           
13       determining vesting in employer contributions under AS 14.25.390(b) and                                       
14       eligibility to elect medical benefits under AS 14.25.470. Membership service allowed                              
15       for credit toward medical benefits does not include any service credit purchased under                            
16       AS 14.25.075 for employment by an employer who is not a participating employer in                                 
17       this chapter.                                                                                                     
18    * Sec. 41. AS 14.25.540(h) is amended to read:                                                                     
19            (h)  A member who is eligible to elect transfer to the defined contribution                              
20       retirement plan must make the election not later than 12 months after the first                               
21       day of the month following the administrator's receipt of the notification that the                           
22       member's employer consents to transfers of its members under (i) of this section.                             
23       The election to participate in the defined contribution retirement plan must be made in                           
24       writing on forms and in the manner prescribed by the administrator. Before accepting                              
25       an election to participate in the defined contribution retirement plan, the administrator                         
26       must provide the employee planning on making an election to participate in the                                    
27       defined contribution retirement plan with information, including calculations to                                  
28       illustrate the effect of moving the employee's retirement plan from the defined benefit                           
29       retirement plan to the defined contribution retirement plan as well as other information                          
30       to clearly inform the employee of the potential consequences of the employee's                                    
31       election. An election made under this subsection to participate in the defined                                    

01       contribution retirement plan is irrevocable. Upon making the election, the participant                            
02       shall be enrolled as a member of the defined contribution retirement plan, the                                    
03       member's participation in the plan shall be governed by the provisions of                                         
04       AS 14.25.310 - 14.25.590, and the member's participation in the defined benefit                                   
05       retirement plan under AS 14.25.009 - 14.25.220 shall terminate. The participant's                                 
06       enrollment in the defined contribution retirement plan shall be effective the first day of                        
07       the month after the administrator receives the completed enrollment forms. An                                     
08       election made by an eligible member who is married is not effective unless the                                    
09       election is signed by the individual's spouse.                                                                    
10    * Sec. 42. AS 14.25 is amended by adding a new section to read:                                                    
11            Sec. 14.25.582. Special rules for treatment of qualified military service.                                 
12       Notwithstanding any contrary provisions of AS 14.25.310 - 14.25.590, with respect to                              
13       qualified military service, contributions shall be made and benefits and service credit                           
14       shall be provided in accordance with 26 U.S.C. 414(u).                                                            
15    * Sec. 43. AS 14.25.590(7) is amended to read:                                                                     
16                 (7)  "compensation"                                                                                     
17                      (A)  means                                                                                         
18                           (i)  the total remuneration earned by an employee for                                         
19                 personal services rendered, including cost-of-living differentials, as                                  
20                 reported on the employee's Federal Income Tax Withholding Statement                                     
21                 (Form W-2) from the employer for the calendar year;                                                     
22                           (ii)  the member contribution to the teachers' retirement                                     
23                 system under AS 14.25.340;                                                                              
24                      (B)  does not include retirement benefits, severance pay or other                                  
25            separation bonuses, welfare benefits, per diem, expense allowances, workers'                                 
26            compensation payments, payments for leave not used whether those leave                                       
27            payments are scheduled payments, lump-sum payments, donations, or cash-ins,                                  
28            any remuneration contributed by the employer for or on account of the                                        
29            employee under this plan or under any other qualified or nonqualified                                        
30            employee benefit plan, any remuneration not specifically included above that                                 
31            would have been excluded under 26 U.S.C. 3121(a) (Internal Revenue Code) if                                  

01            the employer had remained in the Federal Social Security System [, OR ANY                                    
02            REMUNERATION PAID BY THE EMPLOYER IN EXCESS OF THE                                                           
03            SOCIAL SECURITY TAXABLE WAGE BASE FOR THE CALENDAR                                                           
04            YEAR];                                                                                                       
05                      (C)  notwithstanding (B) of this paragraph, includes any amount                                    
06            that is contributed by the employer under a salary reduction agreement and that                              
07            is not includible in the gross income of the employee under 26 U.S.C. 125,                                   
08            132(f)(4), 402(e)(3), 402(h)(1)(B), or 403(b) (Internal Revenue Code); the                                   
09            annual compensation limitation for the member, which is so taken into account                                
10            for those purposes, may not exceed $200,000, as adjusted for the cost of living                              
11            in accordance with 26 U.S.C. 401(a)(17)(B) (Internal Revenue Code), with the                                 
12            limitation for a fiscal year being the limitation in effect for the calendar year                            
13            within which the fiscal year begins;                                                                         
14    * Sec. 44. AS 22.25.022(c)(2) is amended to read:                                                                  
15                 (2)  "distributee" means a member or a beneficiary who is the surviving                                 
16       spouse of the member or an alternate payee;                                                                   
17    * Sec. 45. AS 22.25.022(c)(3) is amended to read:                                                                  
18                 (3)  "eligible retirement plan"                                                                         
19                      [(A)]  means                                                                                       
20                      (A) [(i)]  an individual retirement account described in 26                                    
21            U.S.C. 408(a);                                                                                               
22                      (B) [(ii)]  an individual retirement annuity defined in 26 U.S.C.                              
23            408(b);                                                                                                      
24                      (C) [(iii)]  an annuity plan described in 26 U.S.C. 403(a);                                    
25                      (D) [(iv)]  a qualified trust described in 26 U.S.C. 401(a);                                   
26                      (E) [(v)]  on and after January 1, 2002, an annuity plan                                       
27            described in 26 U.S.C. 403(b); or                                                                            
28                      (F) [(vi)]  on or after January 1, 2002, a governmental plan                                   
29            described in 26 U.S.C. 457(b); or                                                                        
30                      (G)  on or after January 1, 2008, a Roth IRA described in 26                                   
31            U.S.C. 408A [AND                                                                                         

01                      (B)  NOTWITHSTANDING (A) OF THIS PARAGRAPH,                                                        
02            MEANS, WITH RESPECT TO DISTRIBUTIONS MADE BEFORE                                                             
03            JANUARY 1, 2002, AN INDIVIDUAL RETIREMENT ACCOUNT OR AN                                                      
04            INDIVIDUAL RETIREMENT ANNUITY ACCOUNT DESCRIBED OR                                                           
05            DEFINED IN 26 U.S.C. 408 IN THE CASE OF AN ELIGIBLE ROLLOVER                                                 
06            DISTRIBUTION TO A BENEFICIARY WHO IS THE SURVIVING                                                           
07            SPOUSE OF A MEMBER];                                                                                         
08    * Sec. 46. AS 22.25.022(c)(4) is amended to read:                                                                  
09                 (4)  "eligible rollover distribution" means a distribution of all or part of                            
10       a total account to a distributee, except for                                                                      
11                      (A)  a distribution that is one of a series of substantially equal                                 
12            installments payable not less frequently than annually over the life expectancy                              
13            of the distributee or the joint and last survivor life expectancy of the distributee                         
14            and the distributee's designated beneficiary, as defined in 26 U.S.C. 401(a)(9);                             
15                      (B)  a distribution that is one of a series of substantially equal                                 
16            installments payable not less frequently than annually over a specified period                               
17            of 10 years or more;                                                                                         
18                      (C)  a distribution that is required under 26 U.S.C. 401(a)(9);                                    
19                      (D)  the portion of any distribution that is not includable in                                     
20            gross income; however, a portion under this subparagraph may be                                          
21            transferred only to an individual retirement account or annuity described                                
22            in 26 U.S.C. 408(a) or (b), to a qualified plan described in 26 U.S.C. 401(a)                            
23            or 403(a), or to an annuity contract described in 26 U.S.C. 403(b), that                                 
24            agrees to separately account for amounts transferred, including separately                               
25            accounting for the portion of the distribution that is includable in gross                               
26            income and the portion of the distribution that is not includable in gross                               
27            income; and                                                                                              
28                      (E)  [A DISTRIBUTION MADE ON OR AFTER JANUARY                                                      
29            1, 2002, THAT IS ON ACCOUNT OF HARDSHIP; AND                                                                 
30                      (F)]  other distributions that are reasonably expected to total less                               
31            than $200 during a year.                                                                                     

01    * Sec. 47. AS 22.25.046 is amended by adding a new subsection to read:                                             
02            (c)  Employer contributions shall be separately computed for benefits provided                               
03       by AS 22.25.090, and shall be deposited in the Alaska retiree health care trust                                   
04       established under AS 39.30.097(a).                                                                                
05    * Sec. 48. AS 22.25.090 is amended by adding a new subsection to read:                                             
06            (f)  On and after July 1, 2007, benefits under this section will be provided in                              
07       part by the Alaska retiree health care trust established under AS 39.30.097(a).                                   
08    * Sec. 49. AS 37.10.210(a) is amended to read:                                                                     
09            (a)  The Alaska Retirement Management Board is established in the                                            
10       Department of Revenue. The board's primary mission is to serve as the trustee of the                              
11       assets of the state's retirement systems, the State of Alaska Supplemental Annuity                                
12       Plan, and the deferred compensation program for state employees, and the Alaska                               
13       retiree health care trusts established under AS 39.30.097. Consistent with                                    
14       standards of prudence, the board has the fiduciary obligation to manage and invest                                
15       these assets in a manner that is sufficient to meet the liabilities and pension obligations                       
16       of the systems, plan, [AND] program, and trusts. The board may, with the approval                             
17       of the commissioner of revenue and upon agreement with the responsible fiduciary,                                 
18       manage and invest other state funds so long as the activity does not interfere with the                           
19       board's primary mission. In making investments, the board shall exercise the powers                               
20       and duties of a fiduciary of a state fund under AS 37.10.071.                                                     
21    * Sec. 50. AS 39.30 is amended by adding new sections to read:                                                     
22            Sec. 39.30.097. Alaska retiree health care trusts. (a) The commissioner of                                 
23       administration is authorized to prefund medical benefits provided by AS 14.25.168,                                
24       AS 22.25.090, and AS 39.35.535 by establishing an irrevocable trust that is exempt                                
25       from federal income tax under 26 U.S.C. 115 and subject to the applicable financial                               
26       reporting, disclosure and actuarial requirements of the Governmental Accounting                                   
27       Standards Board.                                                                                                  
28            (b)  The commissioner of administration is authorized to prefund medical                                     
29       benefits provided by AS 14.25.480, AS 39.30.300, and AS 39.35.880 by establishing                                 
30       an irrevocable trust that is exempt from federal income tax under 26 U.S.C. 115 and                               
31       subject to the applicable financial reporting, disclosure and actuarial requirements of                           

01       the Governmental Accounting Standards Board.                                                                      
02            (c)  The plans and assets of the Alaska retiree health care trusts shall be under                            
03       the governance and investment authority of the Alaska Retirement Management                                       
04       Board, which shall serve as trustee of the trust as provided in AS 37.10.210. The                                 
05       commissioner of administration or the commissioner's designee shall serve as                                      
06       administrator of the Alaska retiree health care trusts.                                                           
07            (d)  All employer contributions, appropriations, earnings, and reserves for the                              
08       payment of retiree medical obligations shall be credited to the retiree health care                               
09       trusts. The prefunded amounts shall be available without fiscal year limitations for                              
10       retiree medical benefits and administration costs. The amounts remaining in the trusts,                           
11       if any, after retiree medical benefits and administration costs have been paid in any                             
12       year shall be retained in the trusts for future payments, until the satisfaction of all                           
13       employer liabilities under the trusts for retiree medical benefits. All prefunded                                 
14       amounts shall be used solely for the payment of retiree medical benefits and                                      
15       administration costs and for no other purpose.                                                                    
16            (e)  The assets of the Alaska retiree health care trusts may be pooled, for                                  
17       investment purposes, with assets of the retirement systems, so long as such assets are                            
18       accounted for separately.                                                                                         
19            Sec. 39.30.098. Regulations. The commissioner of administration may adopt                                  
20       regulations to implement AS 39.30.090 - 39.30.097. Regulations adopted by the                                     
21       commissioner under this section relate to the internal management of state agencies                               
22       and their adoption is not subject to AS 44.62 (Administrative Procedure Act.).                                    
23    * Sec. 51. AS 39.30.154 is amended to read:                                                                        
24            Sec. 39.30.154. Powers and duties of the administrator. The administrator                                  
25       has the same powers and duties with regard to the plan as those set out in                                        
26       AS 14.25.003 and 14.25.004 [AS 14.25.004].                                                                    
27    * Sec. 52. AS 39.30.160(a) is amended to read:                                                                     
28            (a)  The Department of Administration shall, in accordance with policies                                     
29       prescribed by regulations adopted by the commissioner [OF THE ALASKA                                          
30       RETIREMENT MANAGEMENT BOARD], provide to employees for whom special                                               
31       individual employee benefit accounts are established under AS 39.30.150(c) the                                    

01       following benefit options:                                                                                        
02                 (1)  supplemental health benefits;                                                                      
03                 (2)  supplemental death benefits;                                                                       
04                 (3)  supplemental disability benefits; and                                                              
05                 (4)  supplemental dependent care benefits.                                                              
06    * Sec. 53. AS 39.30.160(e) is amended to read:                                                                     
07            (e)  Regulations adopted by the commissioner [BOARD] implementing                                        
08       AS 39.30.150 and this section are not subject to AS 44.62 (Administrative Procedure                               
09       Act).                                                                                                             
10    * Sec. 54. AS 39.30  is amended by adding a new section to read:                                                   
11            Sec. 39.30.165. Appeals. A final decision made under AS 39.30.150 -                                        
12       39.30.180 is subject to appeal under AS 44.64.                                                                    
13    * Sec. 55. AS 39.30 is amended by adding a new section to read:                                                    
14            Sec. 39.30.335. Appeals. A final decision made under AS 39.30.300 -                                        
15       39.30.495 is subject to appeal under AS 44.64.                                                                    
16    * Sec. 56. AS 39.30.340 is amended to read:                                                                        
17            Sec. 39.30.340. Powers and duties of the administrator. The administrator                                  
18       shall establish a teachers' and public employees' retiree health reimbursement                                    
19       arrangement plan trust fund in which the assets of the plan shall be deposited and held.                          
20       The retiree health reimbursement arrangement plan trust fund may be a sub-                                    
21       trust of the Alaska retiree health care trust established under AS 39.30.097(b).                              
22       The administrator has the same powers and duties with regard to the plan and the trust                            
23       fund as provided in AS 14.25.003 and 14.25.004 [AS 14.25.004].                                                
24    * Sec. 57. AS 39.30.370 is amended to read:                                                                        
25            Sec. 39.30.370. Contributions by employers. For each member of the plan,                                   
26       an employer shall contribute to the teachers' and public employees' retiree health                                
27       reimbursement arrangement plan trust fund an amount equal to three percent of the                                 
28       average annual compensation of all employees of all employers in the teachers'                                
29       retirement system and public employees' retirement system [EMPLOYER'S                                         
30       AVERAGE ANNUAL EMPLOYEE COMPENSATION]. The administrator shall                                                    
31       maintain a record for each member to account for employer contributions on behalf of                              

01       that member. The board shall establish by regulation the rate of interest to be applied                           
02       annually to the amount in a member's individual account.                                                          
03    * Sec. 58. AS 39.35.115 is amended by adding new subsections to read:                                              
04            (d)  The retirement plan established by AS 39.35.095 - 39.35.680 is a joint                                  
05       contributory plan.                                                                                                
06            (e)  If, upon termination of the plan, all liabilities are satisfied, any excess                             
07       assets shall revert to the employers as determined by the administrator, subject to the                           
08       approval of the termination by the Internal Revenue Service.                                                      
09    * Sec. 59. AS 39.35.165(f) is amended to read:                                                                     
10            (f)  The board may accept rollover contributions from a member and direct                                    
11       transfers, as described in this subsection, for the purchase, in whole or in part, of                             
12       credited service for the reinstatement, in whole or in part, of forfeited credited service                        
13       under AS 39.35.350. A rollover contribution or transfer as described in this subsection                           
14       shall also be treated as employer contributions for the purpose of determining tax                                
15       treatment under the Internal Revenue Code and may be made by any one or a                                         
16       combination of the following methods:                                                                             
17                 (1)  subject to the limitations prescribed in 26 U.S.C. 401(a)(3) and 26                                
18       U.S.C. 402(c), accepting eligible rollover distributions directly from one or more                                
19       eligible retirement plans as defined by 26 U.S.C. 402(c)(8)(B) [PROGRAMS OF                               
20       ANOTHER EMPLOYER THAT ARE QUALIFIED UNDER 26 U.S.C. 401(a) OR                                                     
21       ACCEPTING ROLLOVERS DIRECTLY FROM A MEMBER];                                                                      
22                 (2)  [SUBJECT TO THE LIMITATIONS PRESCRIBED IN 26 U.S.C.                                                
23       408(d)(3)(A)(ii), ACCEPTING FROM A MEMBER CONDUIT ROLLOVER                                                        
24       CONTRIBUTIONS THAT ARE RECEIVED BY THE EMPLOYEE FROM ONE                                                          
25       OR MORE CONDUIT ROLLOVER INDIVIDUAL RETIREMENT ACCOUNTS                                                           
26       PREVIOUSLY ESTABLISHED BY THE MEMBER;                                                                             
27                 (3)]  subject to the limitations prescribed in 26 U.S.C. 403(b)(13),                                    
28       accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the                          
29       member, on or after January 1, 2002, from a tax sheltered annuity described in 26                                 
30       U.S.C. 403(b);                                                                                                    
31                 (3) [(4)]  subject to the limitations prescribed in 26 U.S.C. 457(e)(17),                           

01       accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the                          
02       member, on or after January 1, 2002, from an eligible deferred compensation plan of a                             
03       tax-exempt organization or a state or local government described in 26 U.S.C. 457(b);                             
04                 (4) [(5)]  accepting direct trustee-to-trustee transfer from an account                             
05       established for the benefit of the member in AS 39.30.150 - 39.30.180 (Alaska                                     
06       Supplemental Annuity Plan).                                                                                       
07    * Sec. 60. AS 39.35.165(f) is amended to read:                                                                     
08            (f)  The board may accept rollover contributions from a member [AND                                          
09       DIRECT TRANSFERS, AS DESCRIBED IN THIS SUBSECTION, FOR THE                                                        
10       PURCHASE, IN WHOLE OR IN PART, OF CREDITED SERVICE FOR THE                                                        
11       REINSTATEMENT, IN WHOLE OR IN PART, OF FORFEITED CREDITED                                                         
12       SERVICE UNDER AS 39.35.350]. A rollover contribution [OR TRANSFER] as                                             
13       described in this subsection shall also be treated as employer contributions for the                              
14       purpose of determining tax treatment under the Internal Revenue Code and may be                                   
15       made by any one or a combination of the following methods:                                                        
16                 (1)  subject to the limitations prescribed in 26 U.S.C. 401(a)(3) and 26                                
17       U.S.C. 402(c), accepting eligible rollover distributions directly from one or more                                
18       eligible retirement plans as defined by 26 U.S.C. 402(c)(8)(B);                                                   
19                 (2)  subject to the limitations prescribed in 26 U.S.C. 403(b)(13),                                     
20       accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the                          
21       member, on or after January 1, 2002, from a tax sheltered annuity described in 26                                 
22       U.S.C. 403(b);                                                                                                    
23                 (3)  subject to the limitations prescribed in 26 U.S.C. 457(e)(17),                                     
24       accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the                          
25       member, on or after January 1, 2002, from an eligible deferred compensation plan of a                             
26       tax-exempt organization or a state or local government described in 26 U.S.C. 457(b);                             
27                 (4)  accepting direct trustee-to-trustee transfer from an account                                       
28       established for the benefit of the member in AS 39.30.150 - 39.30.180 (Alaska                                     
29       Supplemental Annuity Plan).                                                                                       
30    * Sec. 61. AS 39.35.195(b) is amended to read:                                                                     
31            (b)  Except as provided by AS 39.35.165(f) [AS 39.35.165(f)(5)], the plan does                           

01       not accept contributions of eligible rollover distributions.                                                      
02    * Sec. 62. AS 39.35.195(c)(2) is amended to read:                                                                  
03                 (2)  "distributee" means a member or a beneficiary who is the surviving                                 
04       spouse of the member or an alternate payee;                                                                   
05    * Sec. 63. AS 39.35.195(c)(3) is amended to read:                                                                  
06                 (3)  "eligible retirement plan"                                                                         
07                      [(A)]  means                                                                                       
08                      (A) [(i)]  an individual retirement account described in 26                                    
09            U.S.C. 408(a);                                                                                               
10                      (B) [(ii)]  an individual retirement annuity defined in 26 U.S.C.                              
11            408(b);                                                                                                      
12                      (C) [(iii)]  an annuity plan described in 26 U.S.C. 403(a);                                    
13                      (D) [(iv)]  a qualified trust described in 26 U.S.C. 401(a);                                   
14                      (E) [(v)]  on and after January 1, 2002, an annuity plan                                       
15            described in 26 U.S.C. 403(b); or                                                                            
16                      (F) [(vi)]  on or after January 1, 2002, a governmental plan                                   
17            described in 26 U.S.C. 457(b); or                                                                        
18                      (G)  on or after January 1, 2008, a Roth IRA described in 26                                   
19            U.S.C. 408A [AND                                                                                         
20                      (B)  NOTWITHSTANDING (A) OF THIS PARAGRAPH,                                                        
21            MEANS, WITH RESPECT TO DISTRIBUTIONS MADE BEFORE                                                             
22            JANUARY 1, 2002, AN INDIVIDUAL RETIREMENT ACCOUNT OR AN                                                      
23            INDIVIDUAL RETIREMENT ANNUITY ACCOUNT DESCRIBED OR                                                           
24            DEFINED IN 26 U.S.C. 408 IN THE CASE OF AN ELIGIBLE ROLLOVER                                                 
25            DISTRIBUTION TO A BENEFICIARY WHO IS THE SURVIVING                                                           
26            SPOUSE OF A MEMBER];                                                                                         
27    * Sec. 64. AS 39.35.195(c)(4) is amended to read:                                                                  
28                 (4)  "eligible rollover distribution" means a distribution of all or part of                            
29       a total account to a distributee, except for                                                                      
30                      (A)  a distribution that is one of a series of substantially equal                                 
31            installments payable not less frequently than annually over the life expectancy                              

01            of the distributee or the joint and last survivor life expectancy of the distributee                         
02            and the distributee's designated beneficiary, as defined in 26 U.S.C. 401(a)(9);                             
03                      (B)  a distribution that is one of a series of substantially equal                                 
04            installments payable not less frequently than annually over a specified period                               
05            of 10 years or more;                                                                                         
06                      (C)  a distribution that is required under 26 U.S.C. 401(a)(9);                                    
07                      (D)  the portion of any distribution that is not includable in                                     
08            gross income; however, a portion under this subparagraph may be                                          
09            transferred only to an individual retirement account or annuity described                                
10            in 26 U.S.C. 408(a) or (b), to a qualified plan described in 26 U.S.C. 401(a)                            
11            or 403(a), or to an annuity contract described in 26 U.S.C. 403(b), that                                 
12            agrees to separately account for amounts transferred, including separately                               
13            accounting for the portion of the distribution that is includable in gross                               
14            income and the portion of the distribution that is not includable in gross                               
15            income; and                                                                                              
16                      (E)  [A DISTRIBUTION MADE ON OR AFTER JANUARY                                                      
17            1, 2002, THAT IS ON ACCOUNT OF HARDSHIP; AND                                                                 
18                      (F)]  other distributions that are reasonably expected to total less                               
19            than $200 during a year.                                                                                     
20    * Sec. 65. AS 39.35.250 is amended to read:                                                                        
21            Sec. 39.35.250. Calculation of employer's contribution rate. (a) An                                        
22       employer shall make contributions to the plan [IN AMOUNTS DETERMINED] in                                          
23       accordance with this section. For the purposes of this section and AS 39.35.270, the                          
24       [PAST SERVICE DATE FOR EACH EMPLOYER IS THE ENTRY DATE OF THE                                                     
25       EMPLOYER OR DECEMBER 31, 1972, WHICHEVER IS LATER. AFTER                                                          
26       DECEMBER 31, 1972, IF AMENDMENTS TO AS 39.35.095 - 39.35.680 ARE                                                  
27       ENACTED THAT SUBSTANTIALLY AFFECT BENEFITS ACCRUED BEFORE                                                         
28       THE EFFECTIVE DATE OF THE AMENDMENT, THE PAST SERVICE DATE                                                        
29       WILL BE CHANGED TO DECEMBER 31 OF THE YEAR IMMEDIATELY                                                            
30       PRECEDING THAT IN WHICH THE AMENDMENT IS ENACTED. THE]                                                            
31       contribution rate is the sum of the consolidated employer normal cost rate and the                            

01       past service rate as approved by the board.                                                                   
02            (b)  In (a) of this section, "consolidated employer normal cost rate" means the                          
03       percentage of compensation of all active employees in the system [PLAN] which, [IF                            
04       PAID OVER THE PERIOD OF THEIR CREDITED SERVICE AFTER THEIR                                                        
05       PAST SERVICE DATE AND] when combined with all employee contributions to the                                   
06       plan, is sufficient to provide the benefits earned during the year beginning after the                    
07       last valuation date [AFTER SUCH PAST SERVICE DATES]. This percentage is                                       
08       [UNIFORMLY] determined at the plan level for all employers and is applicable to                               
09       each employer.                                                                                                    
10            (c)  In (a) of this section, "past service rate" means the percentage of                                     
11       compensation of all active employees in the system [PLAN] necessary to provide the                            
12       annual amount required to amortize the unfunded obligations of the employer for                                   
13       benefits earned by the employer's members in the plan as of [BEFORE] the date of                          
14       the last actuarial valuation [EMPLOYER'S PAST SERVICE DATE] over a period                                     
15       not to exceed the maximum allowed by generally accepted accounting principles                                 
16       of the Governmental Accounting Standards Board [40 YEARS. THE PERIOD OF                                       
17       AMORTIZATION BEGINS AT THE PAST SERVICE DATE OF EACH                                                              
18       EMPLOYER]. The percentage is separately determined for each employer.                                             
19    * Sec. 66. AS 39.35.250 is amended by adding a new subsection to read:                                             
20            (d)  Employer contributions shall be separately computed for benefits provided                               
21       by AS 39.35.535, and shall be deposited in the Alaska retiree health care trust                                   
22       established under AS 39.30.097(a).                                                                                
23    * Sec. 67. AS 39.35.270(a) is amended to read:                                                                     
24            (a)  The amount of each employer's contributions shall be determined by                                      
25       applying the sum of the consolidated employer normal cost [EMPLOYER'S                                         
26       CONTRIBUTION] rate and the employer's past service rate to the total                                          
27       compensation paid to the employer's active employees in the system [, AS                                      
28       CERTIFIED BY THE BOARD, TO THE TOTAL COMPENSATION PAID TO THE                                                     
29       ACTIVE EMPLOYEES OF THE EMPLOYER] for each payroll period, [AND BY]                                           
30       including any adjustments to contributions required by AS 39.35.520(a). This amount                               
31       shall be remitted by the employer to the administrator in accordance with                                         

01       AS 39.35.610.                                                                                                     
02    * Sec. 68. AS 39.35.375(a) is amended to read:                                                                     
03            (a)  An active or inactive member who has never been vested in this plan or in                               
04       the teachers' retirement plan under AS 14.25.009 - 14.25.220, who has at least two                                
05       years of credited service in this plan, and who has membership service in the teachers'                           
06       retirement system may claim credited service in this plan in an amount equal to the                               
07       membership service the member has in the teachers' retirement system. The claimed                                 
08       credited service may be added to service earned under AS 39.35.095 - 39.35.680 to                                 
09       enable the member to qualify for a public service benefit under this section. The                                 
10       member may not claim credited service for membership service for which the member                                 
11       has received a refund under AS 14.25.150 [UNLESS THE MEMBER FULLY PAYS                                            
12       THE INDEBTEDNESS AS ESTABLISHED UNDER AS 14.25.063]. The member                                                   
13       may not claim credited service in this plan based on unused sick leave under                                      
14       AS 14.25.115.                                                                                                     
15    * Sec. 69. AS 39.35.385(c) is amended to read:                                                                     
16            (c)  Credited service for which contributions were refunded is not creditable                                
17       under this section [UNLESS THE REFUNDED CONTRIBUTIONS HAVE BEEN                                                   
18       REPAID. FOR PURPOSES OF (a) AND (b) OF THIS SECTION, A MEMBER OR                                                  
19       FORMER MEMBER DOES NOT HAVE TO BE REEMPLOYED UNDER THIS                                                           
20       PLAN IN ORDER TO PAY REFUNDED CONTRIBUTIONS. COMPOUND                                                             
21       INTEREST AT THE RATE PRESCRIBED BY REGULATION SHALL BE ADDED                                                      
22       TO THE REINSTATEMENT INDEBTEDNESS FROM THE DATE OF THE                                                            
23       REFUND TO THE DATE OF REPAYMENT].                                                                                 
24    * Sec. 70. AS 39.35.522(d) is amended to read:                                                                     
25            (d)  A decision of the [THE] commissioner of administration under this                               
26       section to deny a waiver under this section may be appealed to the office of                                  
27       administrative hearings. The office of administrative hearings may reverse the                                
28       decision of the commissioner and may impose conditions on the granting of a waiver                            
29       which it considers equitable. These conditions may include requiring the member or                                
30       beneficiary to make additional contributions to the plan.                                                         
31    * Sec. 71. AS 39.35.535 is amended by adding a new subsection to read:                                             

01            (f)  On and after July 1, 2007, benefits under this section shall be provided in                             
02       part by the Alaska retiree health care trust established under AS 39.30.097(a).                                   
03    * Sec. 72. AS 39.35.610 is amended by adding a new subsection to read:                                             
04            (b)  If contributions are not submitted within the prescribed time limit, the                                
05       amount of contributions and interest due may be claimed by the administrator from                                 
06       any agency of the state or political subdivision that has in its possession funds of the                          
07       employer or that is authorized to disburse funds to the employer that are not restricted                          
08       by statute or appropriation to a specific purpose. The amount claimed shall be certified                          
09       by the administrator as sufficient to pay the contributions and interest due from the                             
10       employer. The amount claimed shall be submitted to the administrator for deposit in                               
11       the retirement fund and the Alaska retiree health care trust.                                                     
12    * Sec. 73. AS 39.35.615 is amended by adding new subsections to read:                                              
13            (g)  An employer terminating participation in the plan shall pay termination                                 
14       costs determined by the administrator, or enter into a payment plan acceptable to the                             
15       administrator, within 60 days of the employer's receiving notice of its termination                               
16       costs from the administrator. Termination costs not paid within the prescribed time                               
17       limit or in accordance with the approved payment plan shall be collected by the                                   
18       administrator in accordance with AS 39.35.610(b). Termination of participation by an                              
19       employer in the plan does not bar future participation by the employer under                                      
20       AS 39.35.700 - 39.35.990 if the employer has paid in full its prior termination costs.                            
21            (h)  A political subdivision or public organization considering or requesting                                
22       termination from the plan shall pay the cost associated with obtaining a termination                              
23       cost study associated with the employer's termination.                                                            
24    * Sec. 74. AS 39.35.620 is amended by adding new subsections to read:                                              
25            (i)  An employer terminating participation in the plan shall pay termination                                 
26       costs determined by the administrator, or enter into a payment plan acceptable to the                             
27       administrator, within 60 days of the employer's notice of such cost. Termination costs                            
28       not paid within the prescribed time limit or in accordance with the approved payment                              
29       plan shall be collected by the administrator in accordance with AS 39.35.610(b).                                  
30       Termination of participation by an employer in the plan does not bar future                                       
31       participation by the employer under AS 39.35.700 - 39.35.990 if the employer has                                  

01       paid in full its prior termination costs.                                                                         
02            (j)  A political subdivision or public organization being terminated from the                                
03       plan shall pay the cost associated with obtaining a termination cost study associated                             
04       with the employer's termination.                                                                                  
05    * Sec. 75. AS 39.35.650 is amended to read:                                                                        
06            Sec. 39.35.650. Refunds to employers. An employer may not receive an                                       
07       amount from the plan, except as provided under AS 39.35.115(e), 39.35.615(e), or                              
08       [AS 39.35.615(e) AND] 39.35.620(g).                                                                               
09    * Sec. 76. AS 39.35 is amended by adding a new section to read:                                                    
10            Sec. 39.35.678. Internal Revenue Code compliance. (a) The administrator                                    
11       shall use forfeitures that arise for any reason, including from termination of                                    
12       employment or death, to reduce employer contributions. Forfeitures may not be                                     
13       applied to increase the benefits of any member.                                                                   
14            (b)  The administrator shall determine the amount of any benefit that is                                     
15       determined on the basis of actuarial tables using assumptions approved by the                                     
16       commissioner. The amount of benefits is not subject to employer discretion.                                       
17            (c)  Employee contributions paid to, and retirement benefits paid from, the plan                             
18       may not exceed the annual limits on contributions and benefits, respectively, allowed                             
19       by 26 U.S.C. 415. Notwithstanding any contrary provision of law, the administrator                                
20       may modify a request by a member to make a contribution to a plan if the amount of                                
21       the contribution would exceed the limits provided in 26 U.S.C. 415 by using the                                   
22       following methods:                                                                                                
23                 (1)  if the law requires a lump sum payment for the purchase of service                                 
24       credit, the administrator may establish a periodic payment plan for the member to                                 
25       avoid a contribution in excess of the limits under 26 U.S.C. 415(c) or 415(n);                                    
26                 (2)  if a periodic payment plan under (1) of this subsection will not                                   
27       avoid a contribution in excess of the limits imposed by 26 U.S.C. 415(c), the                                     
28       administrator may either reduce the member's contribution to an amount within the                                 
29       limits of that section or refuse the member's contribution.                                                       
30    * Sec. 77. AS 39.35.680(3) is amended to read:                                                                     
31                 (3)  "administrator" means [THE PERSON APPOINTED BY] the                                                

01       commissioner of administration or the commissioner's designee appointed under                                 
02       AS 39.35.003 [AS 39.35.050];                                                                                  
03    * Sec. 78. AS 39.35.680(9) is amended to read:                                                                     
04                 (9)  "compensation" means the remuneration earned by an employee                                        
05       for personal services rendered to an employer, including employee contributions under                             
06       AS 39.35.160, cost-of-living differentials only as provided in AS 39.35.675, payments                             
07       for leave that is actually used by the employee, the amount by which the employee's                               
08       wages are reduced under AS 39.30.150(c), an amount that is contributed by the                                 
09       employer under a salary reduction agreement and that is not includable in the                                 
10       gross income of the employee under 26 U.S.C. 125 or 132(f)(4), and any amount                                 
11       deferred under an employer-sponsored deferred compensation plan, but does not                                     
12       include retirement benefits, severance pay or other separation bonuses, welfare                                   
13       benefits, per diem, expense allowances, workers' compensation payments, or                                        
14       payments for leave not used by the employee whether those leave payments are                                      
15       scheduled payments, lump-sum payments, donations, or cash-ins; for a member first                                 
16       hired on or after July 1, 1996, compensation does not include remuneration in excess                              
17       of the limitations set out in 26 U.S.C. 401(a)(17) (Internal Revenue Code);                                       
18    * Sec. 79. AS 39.35.680(18) is amended to read:                                                                    
19                 (18)  "employer" means                                                                                  
20                      (A)  the State of Alaska; [OR]                                                                     
21                      (B)  a political subdivision or public organization of the state                                   
22            that participates in the plan based on a resolution to participate in the plan                           
23            that was approved by the administrator on or before July 1, 2006; or                                     
24                      (C)  a political subdivision or public organization of the                                     
25            state that, as a result of consolidation or reorganization that occurs on or                             
26            after July 1, 2006, assumes liability under the plan of a political                                      
27            subdivision or public organization described in (B) of this paragraph;                                   
28    * Sec. 80. AS 39.35.700 is amended to read:                                                                        
29            Sec. 39.35.700. Applicability of AS 39.35.700 - 39.35.990. The provisions of                               
30       AS 39.35.700 - 39.35.990 apply only to members first hired on or after July 1, 2006,                              
31       members who are employed by employers that do not participate in the defined                                  

01       benefit retirement plan established under AS 39.35.095 - 39.35.680, or to members                             
02       who transfer into the defined contribution retirement plan under AS 39.35.940.                                
03    * Sec. 81. AS 39.35.700 is amended to read:                                                                        
04            Sec. 39.35.700. Applicability of AS 39.35.700 - 39.35.990. The provisions of                               
05       AS 39.35.700 - 39.35.990 apply only to members first hired on or after July 1, 2006,                              
06       members who are employed by employers that do not participate in the defined benefit                              
07       retirement plan established under AS 39.35.095 - 39.35.680, former members as                                 
08       defined in AS 39.35.680, or to members who transfer into the defined contribution                             
09       retirement plan under AS 39.35.940.                                                                               
10    * Sec. 82. AS 39.35.710(c) is amended to read:                                                                     
11            (c)  The retirement plan established by AS 39.35.700 - 39.35.990 is intended to                              
12       qualify under 26 U.S.C. 401(a), [AND] 414(d), and 414(k) (Internal Revenue Code)                          
13       as a qualified retirement plan established and maintained by the state for its                                    
14       employees, for the employees of political subdivisions, public corporations, and public                           
15       organizations of the state, and for the employees of other employers whose                                        
16       participation is authorized by AS 39.35.700 - 39.35.990 and who participate in the                                
17       plan set out in AS 39.35.700 - 39.35.990. Benefits under AS 39.35.880 are not                                 
18       provided by the defined contribution retirement plan.                                                         
19    * Sec. 83. AS 39.35.750(b) is amended to read:                                                                     
20            (b)  An employer shall also contribute an amount equal to a percentage, as                                   
21       adopted [CERTIFIED] by the board, of each member's compensation from July 1 to                                
22       the following June 30 to pay for retiree major medical insurance. This contribution                               
23       shall be paid into the Alaska retiree health care trust [GROUP HEALTH AND                                     
24       LIFE BENEFITS FUND] established by the commissioner of administration under                                       
25       AS 39.30.097(b) [AS 39.30.095] and shall be accounted for in accordance with                                  
26       regulations established by the commissioner.                                                                      
27    * Sec. 84. AS 39.35.750(e) is amended to read:                                                                     
28            (e)  An employer shall make annual contributions to a trust account in the                               
29       plan, applied as a percentage of each member's compensation from July 1 to the                                
30       following June 30, in an amount determined by the board to be actuarially required to                         
31       fully fund the cost of providing occupational disability and occupational death benefits                          

01       under AS 39.35.700 - 39.35.990 and retirement benefits elected by disabled peace                              
02       officers and fire fighters under AS 39.35.890(h)(2) [AS 39.35.890 AND 39.35.892].                             
03       The contribution required under this subsection for peace officers and fire fighters and                          
04       the contribution required under this subsection for other employees shall be separately                           
05       calculated based on the actuarially calculated costs for each group of employees.                                 
06    * Sec. 85. AS 39.35.760(d)(3) is amended to read:                                                                  
07                 (3)  "eligible retirement plan" means                                                                   
08                      (A)  an [A CONDUIT] individual retirement account described                                    
09            in 26 U.S.C. 408(d)(3)(A);                                                                                   
10                      (B)  an annuity plan described in 26 U.S.C. 403(a);                                                
11                      (C)  a qualified trust described in 26 U.S.C. 401(a);                                              
12                      (D)  an annuity plan described in 26 U.S.C. 403(b); [OR]                                           
13                      (E)  a governmental plan described in 26 U.S.C. 457(b);                                            
14                      (F)  an individual retirement annuity defined in 26 U.S.C.                                     
15            408(b); or                                                                                               
16                      (G)  on or after January 1, 2008, a Roth IRA described in 26                                   
17            U.S.C. 408A;                                                                                             
18    * Sec. 86. AS 39.35.760(d)(4) is amended to read:                                                                  
19                 (4)  "eligible rollover distribution" means a distribution of all or part of                            
20       a total account to a distributee, except for                                                                      
21                      (A)  a distribution that is one of a series of substantially equal                                 
22            installments payable not less frequently than annually over the life expectancy                              
23            of the distributee or the joint and last survivor life expectancy of the distributee                         
24            and the distributee's designated beneficiary, as defined in 26 U.S.C. 401(a)(9);                             
25                      (B)  a distribution that is one of a series of substantially equal                                 
26            installments payable not less frequently than annually over a specified period                               
27            of 10 years or more;                                                                                         
28                      (C)  a distribution that is required under 26 U.S.C. 401(a)(9);                                    
29                      (D)  the portion of any distribution that is not includable in                                     
30            gross income; however, a portion under this subparagraph may be                                          
31            transferred only to an individual retirement account or annuity described                                

01            in 26 U.S.C. 408(a) or (b), to a qualified plan described in 26 U.S.C. 401(a)                            
02            or 403(a), or to an annuity contract described in 26 U.S.C. 403(b), that                                 
03            agrees to separately account for amounts transferred, including separately                               
04            accounting for the portion of the distribution that is includable in gross                               
05            income and the portion of the distribution that is not includable in gross                               
06            income; and                                                                                              
07                      (E)  [A DISTRIBUTION THAT IS ON ACCOUNT OF                                                         
08            HARDSHIP; AND                                                                                                
09                      (F)]  other distributions that are reasonably expected to total less                               
10            than $200 during a year.                                                                                     
11    * Sec. 87. AS 39.35.770 is amended to read:                                                                        
12            Sec. 39.35.770. Transmittal of contributions. All contributions deducted in                                
13       accordance with AS 39.35.700 - 39.35.990 shall be transmitted to the plan for deposit                             
14       in the appropriate account or trusts [TRUST FUND] as soon as administratively                                 
15       feasible, but in no event later than 15 days following the close of the payroll period.                           
16    * Sec. 88. AS 39.35.770 is amended by adding new subsections to read:                                              
17            (b)  If contributions are not transmitted within the prescribed time limit,                                  
18       interest shall be assessed on the outstanding contributions at the rate established under                         
19       AS 39.35.610 from the date that contributions were originally due. Amounts due from                               
20       an employer and interest as prescribed in this subsection may be claimed by the                                   
21       administrator from any agency of the state or political subdivision that has in its                               
22       possession funds of the employer or that is authorized to disburse funds to the                                   
23       employer that are not restricted by statute or appropriation to a specific purpose. The                           
24       amount claimed shall be certified by the administrator as sufficient to pay the                                   
25       contributions and interest due from the employer. The amount claimed shall be                                     
26       submitted to the administrator for deposit in the appropriate account or trusts.                                  
27            (c)  Employers are responsible for administrative fees, investment fees, and                                 
28       investment losses charged to accounts established under AS 39.35.730 resulting from                               
29       contribution adjustments due to employers enrolling members in the plan before the                                
30       members are eligible for membership. Contributions made by employees shall be                                     
31       returned to the employer by reducing future employee contributions due.                                           

01       Contributions, net of fees and investment losses, made by employers shall be used to                              
02       reduce future employer contributions due.                                                                         
03    * Sec. 89. AS 39.35.780 is amended to read:                                                                        
04            Sec. 39.35.780. Limitations on contributions and benefits. Notwithstanding                               
05       any other provisions of this plan, the annual additions to each member's individual                               
06       account under this plan and under all defined contribution plans of the employer                                  
07       required to be aggregated with the contributions from this plan under the provisions of                           
08       26 U.S.C. 415 may not exceed, for any limitation year, the amount permitted under 26                          
09       U.S.C. 415(c) [26 U.S.C. 415] at any time. If the amount of a member's individual                         
10       account [DEFINED CONTRIBUTION PLAN] contributions exceeds the limitation of                                   
11       26 U.S.C. 415(c) for any limitation year, the administrator shall take any necessary                              
12       remedial action to correct an excess contribution. A fixed benefit provided under                             
13       this plan may not exceed, for or during a limitation year, the amount permitted                               
14       under 26 U.S.C. 415(b). If a fixed benefit provided under this plan exceeds, for or                           
15       during a limitation year, the amount permitted under 26 U.S.C. 415(b), the                                    
16       administrator shall take remedial action necessary to comply with the limits on                               
17       the benefit amount in 26 U.S.C. 415(b). The provisions of 26 U.S.C. 415, and the                              
18       regulations adopted under that statute, as applied to qualified [DEFINED                                          
19       CONTRIBUTION] plans of governmental employees are incorporated as part of the                                     
20       terms and conditions of the plan.                                                                                 
21    * Sec. 90. AS 39.35.890(b) is amended to read:                                                                     
22            (b)  The occupational disability benefits accrue beginning the first day of the                              
23       month following termination of employment as a result of the disability and are                                   
24       payable the last day of the month. If a final determination granting the benefit is not                           
25       made in time to pay the benefit when due, a retroactive payment shall be made to                                  
26       cover the period of deferment. The last payment shall be for the first month in which                             
27       the disabled employee                                                                                             
28                 (1)  dies;                                                                                              
29                 (2)  recovers from the disability;                                                                      
30                 (3)  fails to meet the requirements under (f), [OR] (j), or (l) of this                         
31       section; or                                                                                                       

01                 (4)  reaches normal retirement age.                                                                     
02    * Sec. 91. AS 39.35.890(d) is amended to read:                                                                     
03            (d)  The monthly amount of an occupational disability benefit is 40 percent of                               
04       the disabled employee's gross monthly compensation at the time of termination due to                              
05       disability. Notwithstanding AS 39.35.790(b), at the time a member is appointed to                             
06       disability, the member becomes fully vested in the employer contributions made                                
07       under AS 39.35.750(a). A disabled member is fully vested in the contributions to                              
08       the member's individual account made under this subsection. An employee is not                                
09       entitled to elect distributions from the employee's individual contribution                                   
10       account under AS 39.35.810 while the employee is receiving disability benefits                                
11       under this section. While an employee is receiving disability benefits, based on the                          
12       disabled employee's gross monthly compensation at the time of termination due to                                  
13       disability, the employer shall make contributions                                                                 
14                 (1)  to the employee's individual account under AS 39.35.730 on behalf                                  
15       of the employee, without deduction from the employee's disability payments; and                                   
16                 (2)  on behalf of the employee under AS 39.35.750.                                                      
17    * Sec. 92. AS 39.35.890(g) is amended to read:                                                                     
18            (g)  A disabled employee's occupational disability benefit terminates the last                           
19       day of the month in which [WHEN] the disabled employee first qualifies                                    
20       [ATTAINS ELIGIBILITY] for normal retirement. At that time, the employee's                                         
21       retirement benefit shall be determined under the provisions of AS 39.35.820 -                                     
22       39.35.840, 39.35.870, and 39.35.880. An employee whose occupational disability                                
23       benefit terminates under this subsection [RECEIVING DISABILITY BENEFITS                                       
24       UP UNTIL ELIGIBILITY FOR RETIREMENT] shall be considered to have retired                                          
25       directly from the plan.                                                                                           
26    * Sec. 93. AS 39.35.890(h) is amended to read:                                                                     
27            (h)  Notwithstanding (g) of this section, at the time a peace officer or fire                                
28       fighter receiving occupational disability benefits under this section first attains                               
29       eligibility for normal retirement, the employee shall irrevocably elect to receive                                
30       retirement benefits in the amount calculated as the                                                               
31                 (1)  employee's retirement benefit calculated under the provisions of                                   

01       AS 39.35.820 - 39.35.840; or                                                                                      
02                 (2)  employee's retirement benefit calculated as if the provisions of                                   
03       AS 39.35.370(c) were to apply; however, pension [RETIREMENT] benefits paid                                    
04       under this paragraph must be paid first from the peace officer's or fire fighter's                            
05       individual contribution account, and the remaining benefits must be paid from                                 
06       the trust account established under AS 39.35.750(e); the peace officer or fire                                
07       fighter may not elect other distributions from the peace officer's or fire fighter's                          
08       individual contribution account under AS 39.35.810 [MAY NOT BE MADE                                           
09       FROM THE TRUST FUND OF THE PUBLIC EMPLOYEES' DEFINED BENEFIT                                                      
10       RETIREMENT PLAN].                                                                                                 
11    * Sec. 94. AS 39.35.890(k) is amended to read:                                                                     
12            (k)  Upon the death of a disabled employee who is receiving or is entitled to                                
13       receive an occupational disability benefit, the administrator shall pay the surviving                             
14       spouse a surviving spouse's pension, equal to 40 percent of the employee's monthly                                
15       compensation at the time of termination of employment because of occupational                                 
16       disability. If there is no surviving spouse, the administrator shall pay the survivor's                           
17       pension in equal parts to the dependent children of the employee. While the monthly                           
18       survivor's pension is being paid, the survivor is not entitled to elect distributions                         
19       from the employee's individual contribution account under AS 39.35.810. The                                   
20       first payment of the surviving spouse's pension or of a dependent child's pension shall                           
21       accrue from the first day of the month following the employee's death and is payable                              
22       the last day of the month. The last payment shall be made the last day of [FOR] the                           
23       last month in which there is an eligible surviving spouse or dependent child, or the                      
24       last day of the month in which the employee would have first qualified for normal                             
25       retirement if the employee had survived, whichever day comes sooner. A                                        
26       retirement benefit shall be determined under the provisions of AS 39.35.820 -                                 
27       39.35.840, 39.35.870, and 39.35.880 based on [. ON] the date the employee would                           
28       have first qualified for normal retirement [OF THE EMPLOYEE WOULD HAVE                                        
29       OCCURRED] if the employee had survived. In addition to payment of the                                         
30       member's individual account, the surviving spouse or, if there is no surviving                                
31       spouse, the surviving dependent children of the member, shall receive an                                      

01       additional benefit in an amount equal to the accumulated contributions that                                   
02       would have been made to the deceased member's individual account under                                        
03       AS 39.35.730(a) and 39.35.750(a), based on the deceased member's gross monthly                                
04       compensation at the time of occupational disability, from the time of the                                     
05       member's death to the date the member would have first qualified for normal                                   
06       retirement if the member had survived. Earnings shall be allocated to the                                     
07       additional benefit calculated under this subsection based on the actual rate of                               
08       return, net of expenses, of the trust account established under AS 39.35.750(e)                               
09       over the period that the contributions would have been made. This additional                                  
10       amount and allocated earnings shall be paid in the same manner as determined                                  
11       for the member's individual account under AS 39.35.820 - 39.35.860 to the extent                              
12       permitted by the Internal Revenue Service. For the purpose of determining                                     
13       eligibility of an employee's survivor who is receiving a benefit under this                                   
14       subsection for medical benefits under AS 39.35.870 - 39.35.880, an employee                                   
15       [LIVED, THE RETIREMENT BENEFIT SHALL BE DETERMINED UNDER THE                                                      
16       PROVISIONS OF AS 39.35.820 - 39.35.840, 39.35.870, AND 39.35.880. AN                                              
17       EMPLOYEE] who died while receiving disability benefits shall be considered to have                                
18       retired directly from the plan on the date the employee would have first qualified for                        
19       normal retirement if the employee had survived. The period during which the                                   
20       employee was eligible for a disability benefit and the period during which a                                  
21       survivor's pension is paid to a survivor under this subsection each constitute                                
22       membership service for the purposes of determining eligibility for medical                                    
23       benefits under this chapter and AS 39.30.300 - 39.30.495 [NORMAL                                              
24       RETIREMENT OF THE EMPLOYEE WOULD HAVE OCCURRED IF THE                                                             
25       EMPLOYEE HAD LIVED].                                                                                              
26    * Sec. 95. AS 39.35.890(l) is amended to read:                                                                     
27            (l)  In this section, "occupational disability" means a physical or mental                               
28       condition that the administrator determines presumably permanently prevents                                   
29       an employee from satisfactorily performing the employee's usual duties or the                                 
30       duties of another comparable position or job available to the employee and for                                
31       which the employee is qualified by training or education; however, the proximate                              

01       cause of the condition must be a bodily injury sustained, or a hazard undergone,                              
02       while in the performance and within the scope of the employee's duties and not                                
03       the proximate result of the wilful negligence of the employee [HAS THE                                        
04       MEANING GIVEN IN AS 39.35.680].                                                                                   
05    * Sec. 96. AS 39.35.890 is amended by adding a  new subsection to read:                                            
06            (m)  While a survivor under (k) of this section is receiving a survivor's                                    
07       pension, the employer of the deceased employee shall make contributions with respect                              
08       to the survivor based on the deceased employee's gross monthly compensation at the                                
09       time of termination due to disability                                                                             
10                 (1)  that would have been paid to the employee's individual account                                     
11       under AS 39.35.730 and 39.35.750(a), to the trust account established under                                       
12       AS 39.35.750(e), without deduction from the survivor's pension; and                                               
13                 (2)  to the appropriate accounts and funds under AS 39.35.750(b) - (e).                                 
14    * Sec. 97. AS 39.35 is amended by adding a new section to read:                                                    
15            Sec. 39.35.891. Disability benefit and disabled peace officer or fire fighter                              
16       retirement benefit adjustment. (a) Once each year, the administrator shall increase                             
17       disability benefits and retirement benefits elected by disabled peace officers or fire                            
18       fighters under AS 39.35.890(h)(2). The amount of the increase is a percentage of the                              
19       current disability benefit or retirement benefit equal to the lesser of 75 percent of the                         
20       increase in the cost of living in the preceding calendar year or nine percent.                                    
21            (b)  If a disabled member was not receiving a benefit during the entire                                      
22       preceding calendar year, the increase in the benefit under this section shall be adjusted                         
23       by multiplying it by a fraction, the numerator of which is the number of months for                               
24       which the benefit was received in the preceding calendar year and the denominator of                              
25       which is 12.                                                                                                      
26            (c)  If a disabled peace officer or fire fighter elects to receive a retirement                              
27       benefit in the amount calculated under AS 39.35.890(h)(2), the administrator shall, at                            
28       the time the disabled peace officer or fire fighter is appointed to retirement, increase                          
29       the retirement benefit by a percentage equal to the total cumulative percentage that has                          
30       been applied to the disabled peace officer's or fire fighter's disability benefit under this                      
31       section.                                                                                                          

01            (d)  An increase in benefit payments under this section is effective July 1 of                               
02       each year and is based on the percentage increase in the Consumer Price Index for                                 
03       urban wage earners and clerical workers for Anchorage, Alaska, during the previous                                
04       calendar year, as determined by the United States Department of Labor, Bureau of                                  
05       Labor Statistics.                                                                                                 
06            (e)  Benefit adjustments under this section shall terminate the last day of the                              
07       month following the date on which a disabled member is no longer receiving a                                      
08       disability benefit under AS 39.35.890, unless the member is a disabled peace officer or                           
09       fire fighter and has chosen a retirement benefit under AS 39.35.890(h)(2).                                        
10    * Sec. 98. AS 39.35.892(b) is amended to read:                                                                     
11            (b)  The first payment of the surviving spouse's pension or of a dependent                                   
12       child's pension shall be made for the month following the month in which the                                      
13       employee dies. Payments [, AND PAYMENT] shall cease on the last day of the                                
14       month in which there is no longer an eligible spouse or eligible dependent child,                             
15       or the last day of the month following the earliest date [TO BE MADE                                          
16       BEGINNING WITH THE MONTH IN WHICH] the employee would have first                                                  
17       qualified for normal retirement if the employee had survived, whichever day is                            
18       sooner.                                                                                                       
19    * Sec. 99. AS 39.35.892(c) is amended to read:                                                                     
20            (c)  The monthly survivor's pension in (b) of this section for survivors of                                  
21       employees who were not peace officers or fire fighters is 40 percent of the employee's                            
22       monthly compensation in the month in which the employee dies. The monthly                                         
23       survivor's pension in (b) of this section for survivors of employees who were peace                               
24       officers or fire fighters is 50 percent of the monthly compensation in the month in                               
25       which the employee dies. While the monthly survivor's pension is being paid, the                              
26       survivor is not entitled to elect distributions from the employee's individual                                
27       contribution account under AS 39.35.810, except as required by AS 39.35.840.                                  
28       While the monthly survivor's pension is being paid, the employer shall make                                       
29       contributions with respect to [ON BEHALF OF] the employee's surviving spouse                              
30       and employee's surviving dependent children [BENEFICIARIES] based on the                                      
31       deceased employee's gross monthly compensation at the time of occupational death                                  

01                 (1)  that would have been paid to the employee's individual account                                 
02       under AS 39.35.730 and 39.35.750(a), to the trust account established under                                   
03       AS 39.35.750(e), without deduction from the survivor's pension; and                                           
04                 (2)  to the appropriate accounts and funds under AS 39.35.750(b) - (e)                              
05       [AS 39.35.750].                                                                                                   
06    * Sec. 100. AS 39.35.892(e) is amended to read:                                                                    
07            (e)  On the date the employee would have first qualified for normal                                      
08       retirement [OF THE EMPLOYEE WOULD HAVE OCCURRED] if the employee                                                  
09       had survived [LIVED], the retirement benefit shall be determined under the                                    
10       provisions of AS 39.35.820 - 39.35.840, 39.35.870, and 39.35.880. In addition to                              
11       payment of the member's individual account, the surviving spouse or, if there is                              
12       no surviving spouse, the surviving dependent children of the member, shall                                    
13       receive an additional benefit in an amount equal to the accumulated                                           
14       contributions that would have been made to the deceased member's individual                                   
15       account under AS 39.35.730(a) and 39.35.750(a), based on the deceased member's                                
16       gross monthly compensation at the time of occupational death, from the time of                                
17       the member's death to the date the member would have first qualified for normal                               
18       retirement if the member had survived. Earnings shall be allocated to the                                     
19       additional benefit calculated under this subsection based on the actual rate of                               
20       return, net of expenses, of the trust account established under AS 39.35.750(e)                               
21       over the period that such contributions would have been made. This additional                                 
22       amount and allocated earnings shall be paid in the same manner as determined                                  
23       for the member's individual account under AS 39.35.820 - 39.35.860 to the extent                              
24       permitted by the Internal Revenue Service. An employee who died and whose                                     
25       survivors receive occupational death benefits under this section shall be considered to                           
26       have retired directly from the plan on the date the [NORMAL RETIREMENT OF                                         
27       THE] employee would have first qualified for normal retirement [OCCURRED] if                                  
28       the employee had survived. The period of time during which a survivor's pension                               
29       is paid under this section constitutes membership service for the purpose of                                  
30       determining vesting in employer contributions under AS 39.35.790(b) and                                       
31       eligibility for medical benefits under this chapter and AS 39.30.300 - 39.30.495                              

01       [LIVED].                                                                                                          
02    * Sec. 101. AS 39.35 is amended by adding new sections to read:                                                    
03            Sec. 39.35.893. Survivor's pension adjustment. (a) Once each year, the                                     
04       administrator shall increase payments to a person 60 years of age or older receiving a                            
05       survivor's pension under AS 39.35.890(k) or 39.35.892(c) and to a person who has                                  
06       received a survivor's pension under AS 39.35.890(k) or 39.35.892(c) for at least five                             
07       years, who is not otherwise eligible for an increase under this section.                                          
08            (b)  The amount of the increase is a percentage of the current survivor's                                    
09       pension equal to the lesser of 50 percent of the increase in the cost of living in the                            
10       preceding calendar year or six percent.                                                                           
11            (c)  If a survivor was not receiving a pension during the entire preceding                                   
12       calendar year, the increase in the survivor's pension under this section shall be                                 
13       adjusted by multiplying it by a fraction, the numerator of which is the number of                                 
14       months for which the pension was received in the preceding calendar year and the                                  
15       denominator of which is 12.                                                                                       
16            (d)  The administrator shall increase the initial survivor's pension paid to a                               
17       survivor of a member who died while receiving disability benefits by a percentage                                 
18       equal to the total cumulative percentage that has been applied to the member's                                    
19       disability benefit under AS 39.35.891.                                                                            
20            (e)  An increase in benefit payments under this section is effective July 1 of                               
21       each year and is based on the percentage increase in the Consumer Price Index for                                 
22       urban wage earners and clerical workers for Anchorage, Alaska, during the previous                                
23       calendar year, as determined by the United States Department of Labor, Bureau of                                  
24       Labor Statistics.                                                                                                 
25            (f)  Pension adjustments under this section shall terminate the last day of the                              
26       month following the date on which a survivor is no longer receiving a survivor's                                  
27       pension under AS 39.35.890(k) or 39.35.892(c).                                                                    
28            Sec. 39.35.894. Premiums for retiree major medical insurance coverage                                      
29       upon termination of disability benefits or survivor's pension. The premium for                                  
30       retiree major medical insurance coverage payable by an employee whose disability                                  
31       benefit is terminated under AS 39.35.890(g) or by an eligible survivor whose survivor                             

01       pension is terminated under AS 39.35.890(k) or 39.35.892(e) when the employee                                     
02       would have been eligible for normal retirement if the employee had survived shall be                              
03       determined under AS 39.35.880(g)(2) as if the employee or survivor were eligible for                              
04       Medicare.                                                                                                         
05    * Sec. 102. AS 39.35.900 is amended by adding new subsections to read:                                             
06            (d)  The administrator will use forfeitures in the fixed benefit account of the                              
07       plan that arise for any reason, including from termination of employment or death, to                             
08       reduce employer contributions. Forfeitures may not be applied to increase the benefits                            
09       of any member.                                                                                                    
10            (e)  The administrator will determine the amount of any fixed benefit that is                                
11       determined on the basis of actuarial tables using assumptions approved by the                                     
12       commissioner. The amount of benefits is not subject to employer discretion.                                       
13    * Sec. 103. AS 39.35.910 is amended to read:                                                                       
14            Sec. 39.35.910. Nonguarantee of returns, rates, or benefit amounts. The                                    
15       plan created by AS 39.35.700 - 39.35.990 is, with respect to individual accounts,                             
16       treated as a defined contribution plan, and not a defined benefit plan. The amount of                     
17       money in the individual account of a participant depends on the amount of                                     
18       contributions and the rate of return from investments of the account that varies over                             
19       time. If benefits are paid in the form of an annuity, the benefit amount payable is                               
20       dependent on the amount of money in the account and the interest rates applied and                                
21       service fees charged by the annuity payor at the time the annuity is purchased from                           
22       the carrier and benefits are first paid. Nothing in this plan guarantees a participant                        
23                 (1)  a rate of return or interest rate other than that actually earned by the                           
24       account of the participant, less applicable administrative expenses; or                                           
25                 (2)  an annuity based on interest rates or service charges other than                                   
26       interest rates available from and service charges by the annuity payor in effect at the                           
27       time the annuity is paid.                                                                                         
28    * Sec. 104. AS 39.35.940(c) is amended to read:                                                                    
29            (c)  Each eligible member who elects to participate in the defined contribution                              
30       retirement plan shall have transferred to a new account the employee contribution                                 
31       account balance held in trust for the member under the defined benefit retirement plan                            

01       of the public employees' retirement system. A matching employer contribution shall                                
02       be made on behalf of that employee to the new account. The employer shall make the                                
03       matching contribution from funds other than the trust funds of the defined benefit                                
04       retirement plan established under AS 39.35.095 - 39.35.680. The amount of the                                 
05       matching employer contribution shall be subject to, and may not exceed, the                                   
06       limitation of 26 U.S.C. 415(c) during the applicable limitation year as defined by                            
07       AS 39.35.990. If the matching employer contribution would exceed the limits                                   
08       during the limitation year in which the transfer occurs, the remaining amount of                              
09       the matching employer contribution shall be made in the next limitation year, if                              
10       the limits would not be exceeded.                                                                             
11    * Sec. 105. AS 39.35.940(d) is amended to read:                                                                    
12            (d)  Upon a transfer, all membership service previously earned under the                                     
13       defined benefit retirement plan shall be nullified for purposes of entitlement to a future                        
14       benefit under the defined benefit retirement plan but shall be credited for purposes of                           
15       determining vesting in employer contributions under AS 39.35.790(b) and                                       
16       eligibility to elect medical benefits under AS 39.35.870. Membership service allowed                              
17       for credit toward medical benefits does not include any service credit purchased for                              
18       employment by an employer who is not a participating employer in this chapter.                                    
19    * Sec. 106. AS 39.35.940(h) is amended to read:                                                                    
20            (h)  An employee who is eligible to elect transfer to the defined                                        
21       contribution retirement plan must make the election not later than 12 months                                  
22       after the first day of the month following the administrator's receipt of the                                 
23       notification that the employee's employer consents to transfers of its employees                              
24       under (i) of this section. The election to participate in the defined contribution                            
25       retirement plan must be made in writing on forms and in the manner prescribed by the                              
26       administrator. Before accepting an election to participate in the defined contribution                            
27       retirement plan, the administrator must provide the employee planning on making an                                
28       election to participate in the defined contribution retirement plan with information,                             
29       including calculations to illustrate the effect of moving the employee's retirement plan                          
30       from the defined benefit retirement plan to the defined contribution retirement plan as                           
31       well as other information to clearly inform the employee of the potential consequences                            

01       of the employee's election. An election made under this subsection to participate in the                          
02       defined contribution retirement plan is irrevocable. Upon making the election, the                                
03       participant shall be enrolled as a member of the defined contribution retirement plan,                            
04       the member's participation in the plan shall be governed by the provisions of                                     
05       AS 39.35.700 - 39.35.990, and the member's participation in the defined benefit                                   
06       retirement plan under AS 39.35.115 shall terminate. The participant's enrollment in the                           
07       defined contribution retirement plan shall be effective the first day of the month after                          
08       the administrator receives the completed enrollment forms. An election made by an                                 
09       eligible member who is married is not effective unless the election is signed by the                              
10       individual's spouse.                                                                                              
11    * Sec. 107. AS 39.35 is amended by adding new sections to read:                                                    
12            Sec. 39.35.957. Designation of eligible employees, agreement to contribute,                              
13       and amendment of participation. (a) A political subdivision or public organization                              
14       participating in the defined contribution retirement plan under AS 39.35.700 -                                    
15       39.35.990 shall designate the departments, groups, or other classifications of                                    
16       employees eligible to participate in the plan and, by participating, shall legally be                             
17       presumed to have agreed to make contributions each year in the amounts required for                               
18       members of the plan under AS 39.35.750.                                                                           
19            (b)  If the employer does not participate in the defined benefit retirement plan                             
20       under AS 39.35.095 - 39.35.680, an employee who is eligible under (a) of this section                             
21       and who is a member of the defined benefit retirement plan under AS 39.35.095 -                                   
22       39.35.680 does not accrue credited service or make contributions under that defined                               
23       benefit retirement plan, but shall be a member of the defined contribution retirement                             
24       plan under AS 39.35.700 - 39.35.990 and make contributions under that plan.                                       
25            (c)  An employer may request to amend its participation in the plan to add or                                
26       exclude departments, groups, or other classifications of employees by filing a                                    
27       resolution as provided by AS 39.35.950 or 39.35.955 with the administrator.                                       
28            Sec. 39.35.958. Termination of participation in the plan. (a) A political                                  
29       subdivision or public organization may request that its participation in the plan be                              
30       terminated. The request may be made only after adoption of a resolution by the                                    
31       legislative body of the political subdivision and approval of the resolution by the                               

01       person required by law to approve the resolution, or, in the case of a public                                     
02       organization, after adoption of a resolution by the governing body of that public                                 
03       organization. A certified copy of the resolution shall be filed with the administrator.                           
04            (b)  If contributions are not transmitted to the plan within the prescribed time                             
05       limit, the administrator may grant an extension and shall assess interest on the                                  
06       outstanding contributions at the rate established under AS 39.35.610. If the political                            
07       subdivision or public organization is in default at the end of the extension,                                     
08       participation in the plan is terminated, and it shall be sent notice of termination.                              
09            (c)  When an employer's participation in the plan is terminated, or when an                                  
10       employer terminates coverage of a department, group, or other classification of                                   
11       employees under AS 39.35.957(c), the administrator shall assess the employer a                                    
12       termination cost that the administrator determines is actuarially required to fully fund                          
13       the costs to the plan for employees whose coverage is terminated, including the cost of                           
14       providing the employer's share of retiree health benefits under AS 39.35.880,                                     
15       occupational disability and occupational death benefits under AS 39.35.890 and                                    
16       39.35.892, and pension benefits elected under AS 39.35.890(h)(2).                                                 
17            (d)  An employee whose coverage under the plan is terminated as a result of                                  
18       termination of an employer's participation under this section or amendment of the                                 
19       employer's agreement under AS 39.35.957(c) shall be considered fully vested in                                    
20       employer contributions under AS 39.35.790(b) and in the individual account                                        
21       established for the employee under AS 39.30.730. If the employee is later employed                                
22       with a participating employer, the employee's membership service earned under the                                 
23       plan during employment with a terminated employer shall be credited for purposes of                               
24       determining vesting in employer contributions under AS 39.35.790(b) and eligibility                               
25       for medical benefits under this chapter and AS 39.30.300 - 39.30.495.                                             
26            (e)  An employer terminating participation in the plan shall pay termination                                 
27       costs determined by the administrator, or enter into a payment plan acceptable to the                             
28       administrator, within 60 days of the employer's receiving notice of its termination                               
29       costs from the administrator. Termination costs not paid within the prescribed time                               
30       limit or in accordance with the approved payment plan shall be collected by the                                   
31       administrator in accordance with AS 39.35.610(b). Termination of participation by an                              

01       employer in the plan does not bar future participation by the employer if the employer                            
02       has paid in full its prior termination costs.                                                                     
03            (f)  A political subdivision or public organization considering or requesting                                
04       termination from the plan shall pay the cost associated with obtaining a termination                              
05       cost study associated with the employer's termination.                                                            
06    * Sec. 108. AS 39.35 is amended by adding a new section to read:                                                   
07            Sec. 39.35.972. Special rules for treatment of qualified military service.                                 
08       Notwithstanding any contrary provisions of AS 39.35.700 - 39.35.990, with respect to                              
09       qualified military service, contributions shall be made and benefits and service credit                           
10       shall be provided in accordance with 26 U.S.C. 414(u).                                                            
11    * Sec. 109. AS 39.35.990(7) is amended to read                                                                     
12                 (7)  "compensation"                                                                                     
13                      (A)  means                                                                                         
14                           (i)  the total remuneration earned by an employee for                                         
15                 personal services rendered, including cost-of-living differentials, as                                  
16                 reported on the employee's Federal Income Tax Withholding Statement                                     
17                 (Form W-2) from the employer for the calendar year;                                                     
18                           (ii)  the member contribution to the public employees'                                        
19                 retirement system under AS 39.35.730, employee deferrals under                                          
20                 AS 39.45.010, the wage reduction amount contributed to the Alaska                                       
21                 Supplemental Annuity Plan under AS 39.30.150(a), and the wage                                           
22                 reduction amount contributed to the Alaska Supplemental Benefit Plan                                    
23                 under AS 39.30.150(c), as those statutes may be amended from time to                                    
24                 time;                                                                                                   
25                      (B)  does not include retirement benefits, severance pay or other                                  
26            separation bonuses, welfare benefits, per diem, expense allowances, workers'                                 
27            compensation payments, payments for leave not used whether those leave                                       
28            payments are scheduled payments, lump-sum payments, donations, or cash-ins,                                  
29            any remuneration contributed by the employer for or on account of the                                        
30            employee under this plan or under any other qualified or nonqualified                                        
31            employee benefit plan, any remuneration not specifically included above                                      

01            which would have been excluded under 26 U.S.C. 3121(a) (Internal Revenue                                     
02            Code) if the employer had remained in the Federal Social Security System [,                                  
03            OR ANY REMUNERATION PAID BY THE EMPLOYER IN EXCESS OF                                                        
04            THE SOCIAL SECURITY TAXABLE WAGE BASE FOR THE                                                                
05            CALENDAR YEAR];                                                                                              
06                      (C)  notwithstanding (B) of this paragraph, includes any amount                                    
07            that is contributed by the employer under a salary reduction agreement and that                              
08            is not includible in the gross income of the employee under 26 U.S.C. 125,                                   
09            132(f)(4), 402(e)(3), 402(h)(1)(B), or 403(b) (Internal Revenue Code); the                               
10            annual compensation limitation for the member, which is so taken into account                                
11            for those purposes, may not exceed $200,000, as adjusted for the cost of living                              
12            in accordance with 26 U.S.C. 401(a)(17)(B) (Internal Revenue Code), with the                                 
13            limitation for a fiscal year being the limitation in effect for the calendar year                            
14            within which the fiscal year begins;                                                                         
15    * Sec. 110. AS 39.35.990(16) is amended to read:                                                                   
16                 (16)  "member" or "employee" means a person who is eligible to                                  
17       participate in the plan and who is covered by [AN EMPLOYEE OF AN                                              
18       EMPLOYER OR FORMER EMPLOYEE OF AN EMPLOYER WHO RETAINS A                                                          
19       RIGHT TO BENEFITS UNDER] the plan, including the governor, the lieutenant                                     
20       governor, and a member of the legislature, but does not include full-time or part-                            
21       time instructors of the Department of Labor and Workforce Development and the                                 
22       Department of Education and Early Development in positions that require a                                     
23       teaching certificate;                                                                                         
24    * Sec. 111. AS 39.35.990(20) is amended to read:                                                                   
25                 (20)  "peace officer" or "fire fighter" means an employee occupying a                               
26       position as a peace officer, chief of police, regional public safety officer,                                 
27       correctional officer, correctional superintendent, fire fighter, fire chief, or                               
28       probation officer, but does not include a village public safety officer employed by                           
29       a village public safety officer program established under AS 18.65.670 [HAS THE                               
30       MEANING GIVEN IN AS 39.35.680];                                                                                   
31    * Sec. 112. AS 39.45.020 is amended by adding a new subsection to read:                                            

01            (d)  The administrator of a deferred compensation program under this chapter                                 
02       has the powers and duties with regard to the program as set out in AS 14.25.003 and                               
03       14.25.004, as though those provisions applied to the program.                                                     
04    * Sec. 113. AS 39.45 is amended by adding a new section to read:                                                   
05            Sec. 39.45.055. Appeals. A final decision made under AS 39.45.010 -                                        
06       39.45.060 is subject to appeal under AS 44.64.                                                                    
07    * Sec. 114. AS 44.64.030(a) is amended by adding new paragraphs to read:                                           
08                 (35)  AS 14.25.175 (waiver of adjustments under teachers' defined                                       
09       benefit plan);                                                                                                    
10                 (36)  AS 39.30.165 (supplemental benefits system);                                                      
11                 (37)  AS 39.30.335 (teachers' and public employees' health                                              
12       reimbursement arrangement plan);                                                                                  
13                 (38)  AS 39.35.522 (waiver of adjustments under public employees'                                       
14       defined benefit plan);                                                                                            
15                 (39)  AS 39.45.055 (public employees' deferred compensation                                             
16       program).                                                                                                         
17    * Sec. 115. (a) AS 14.25.045, 14.25.340(b), 14.25.570; AS 39.35.050(a), 39.35.370(k),                            
18 39.35.615(d), 39.35.615(f), 39.35.620(c), 39.35.620(f), 39.35.620(h), and 39.35.730(b) are                              
19 repealed.                                                                                                               
20       (b)  AS 39.35.375(f) is repealed.                                                                                 
21       (c)  Sections 15 and 91, ch. 9, FSSLA 2005, are repealed.                                                         
22    * Sec. 116. The uncodified law of the State of Alaska is amended by adding a new section                           
23 to read:                                                                                                                
24       EMPLOYER CONTRIBUTIONS FOR FISCAL YEAR 2008 FOR                                                                   
25 OCCUPATIONAL DISABILITY AND OCCUPATIONAL DEATH BENEFITS IN THE                                                          
26 TEACHERS' DEFINED CONTRIBUTION RETIREMENT PLAN. Notwithstanding                                                         
27 AS 14.25.350(e), enacted by sec. 20 of this Act, for fiscal year 2008 the employer                                      
28 contribution to fully finance the cost of providing occupational disability and occupational                            
29 death benefits under AS 14.25.485 and 14.25.487 shall be equal to 0.62 percent of the amount                            
30 of compensation paid to all teachers who work for the employer in that year and are members                             
31 of the teachers' defined contribution retirement plan.                                                                  

01    * Sec. 117. The uncodified law of the State of Alaska is amended by adding a new section                           
02 to read:                                                                                                                
03       TRANSFER OF FUNDS TO ALASKA RETIREE HEALTH CARE TRUSTS. The                                                       
04 commissioner of administration shall transfer to the Alaska retiree health care trusts                                  
05 established under AS 39.30.097, enacted by sec. 50 of this Act, all funds for payment of                                
06 retiree health benefits that have been deposited in the group health and life benefits fund                             
07 under AS 39.30.095, including funds in the retiree health insurance fund, and all funds from                            
08 any fund or account into which funds for provision of retiree health benefits have been                                 
09 deposited. The commissioner of administration shall make the transfer on July 1, 2007, or                               
10 immediately after July 1, 2007 when the funds become available to the commissioner for                                  
11 transfer.                                                                                                               
12    * Sec. 118. Sections 5, 6, 17, 60, 68, 69, 81, and 115(b) of this Act take effect July 1, 2010.                    
13    * Sec. 119. Except as provided in sec. 118 of this Act, this Act takes effect immediately                          
14 under AS 01.10.070(c).