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FCCS SB 141(Corrected) Detail
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FCCS SB 141(Corrected): "An Act relating to the teachers' and public employees' retirement systems and creating defined contribution and health reimbursement plans for members of the teachers' retirement system and the public employees' retirement system who are first hired after July 1, 2006; relating to university retirement programs; establishing the Alaska Retirement Management Board to replace the Alaska State Pension Investment Board, the Alaska Teachers' Retirement Board, and the Public Employees' Retirement Board; adding appeals of the decisions of the administrator of the teachers' and public employees' retirement systems to the jurisdiction of the office of administrative hearings; providing for nonvested members of the teachers' retirement system defined benefit plans to transfer into the teachers' retirement system defined contribution plan and for nonvested members of the public employees' retirement system defined benefit plans to transfer into the public employees' retirement system defined contribution plan; providing for political subdivisions and public organizations to request to participate in the public employees' defined contribution retirement plan; and providing for an effective date."

00 FREE CONFERENCE CS FOR SENATE BILL NO. 141(Corrected) 01 "An Act relating to the teachers' and public employees' retirement systems and creating 02 defined contribution and health reimbursement plans for members of the teachers' 03 retirement system and the public employees' retirement system who are first hired after 04 July 1, 2006; relating to university retirement programs; establishing the Alaska 05 Retirement Management Board to replace the Alaska State Pension Investment Board, 06 the Alaska Teachers' Retirement Board, and the Public Employees' Retirement Board; 07 adding appeals of the decisions of the administrator of the teachers' and public 08 employees' retirement systems to the jurisdiction of the office of administrative 09 hearings; providing for nonvested members of the teachers' retirement system defined 10 benefit plans to transfer into the teachers' retirement system defined contribution plan 11 and for nonvested members of the public employees' retirement system defined benefit 12 plans to transfer into the public employees' retirement system defined contribution

01 plan; providing for political subdivisions and public organizations to request to 02 participate in the public employees' defined contribution retirement plan; and providing 03 for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 14.25 is amended by adding new sections to read: 06 Article 1. Administration of the Teachers' Retirement System. 07 Sec. 14.25.001. Purpose. The purpose of this chapter is to encourage 08 qualified teachers to enter and remain in service with participating employers by 09 establishing plans for the payment of retirement and death benefits to or on behalf of 10 the members. 11 Sec. 14.25.002. Attorney general. The attorney general of the state is the 12 legal counsel for the system and shall advise the administrator and represent the 13 system in a legal proceeding. 14 Sec. 14.25.003. Administrator. (a) The commissioner of administration or 15 the commissioner's designee is the administrator of the system. 16 (b) The commissioner of administration shall adopt regulations to govern the 17 operation of the system. 18 Sec. 14.25.004. Powers and duties of the administrator. (a) The 19 administrator shall 20 (1) establish and maintain an adequate system of accounts; 21 (2) transmit the funds deposited in the system to the retirement fund 22 established and maintained by the Alaska Retirement Management Board; 23 (3) approve or disapprove claims for retirement benefits; 24 (4) make payments for the various purposes specified; 25 (5) submit periodic reports or statements of account that are needed; 26 (6) issue a statement of account to an employee not less than once each 27 year showing the amount of the employee's contributions to the applicable plan in the 28 system; 29 (7) formulate and recommend to the commissioner of administration 30 regulations to govern the operation of the system;

01 (8) as soon as possible after the close of each fiscal year, and not later 02 than six months after the close of each fiscal year, send to the governor and the 03 legislature an annual statement on the operations of each of the plans in the system 04 containing 05 (A) a balance sheet; 06 (B) a statement of income and expenditures for the previous 07 fiscal year; 08 (C) a report on valuation of trust fund assets; 09 (D) a summary of assets held in the trust fund listed by the 10 categories of investment, as provided by the Alaska Retirement Management 11 Board; 12 (E) other statistical financial data that are necessary for proper 13 understanding of the financial condition of the system as a whole and each plan 14 in the system and the result of its operations; 15 (9) engage an independent certified public accountant to conduct an 16 annual audit of each plan's accounts and the annual report of the system's financial 17 condition and activity; 18 (10) report to the Legislative Budget and Audit Committee concerning 19 the condition and administration of each plan and distribute the report to the members 20 of each plan in the system; 21 (11) publish an information handbook for each plan in the system at 22 intervals that the administrator considers appropriate; 23 (12) meet at least annually with the board to review the condition and 24 management of the retirement systems and to review significant changes to policies, 25 regulations, or benefits; and 26 (13) do whatever else may be necessary to carry out the purposes of 27 each plan in the system. 28 (b) The administrator is authorized to charge fees necessary to members' 29 accounts to cover the ongoing cost of operating each plan in the system. 30 (c) The administrator is authorized to contract with public and private entities 31 to provide record keeping, benefits payments, and other functions necessary for the

01 administration of each plan in the system. 02 Sec. 14.25.005. Regulations. (a) Regulations adopted by the commissioner 03 of administration under this chapter relate to the internal management of a state 04 agency, and the adoption of the regulations is not subject to AS 44.62 (Administrative 05 Procedure Act). 06 (b) Notwithstanding (a) of this section, a regulation adopted under this chapter 07 shall be published in the Alaska Administrative Register and Code for informational 08 purposes. 09 (c) Each regulation adopted under this chapter must conform to the style and 10 format requirements of the drafting manual for administrative regulations that is 11 published under AS 44.62.050. 12 (d) At least 30 days before the adoption, amendment, or repeal of a regulation 13 under this chapter, the commissioner of administration shall provide notice of the 14 action that is being considered. The notice shall be 15 (1) posted in public buildings throughout the state; 16 (2) published in one or more newspapers of general circulation in each 17 judicial district of the state; 18 (3) mailed to each person or group that has filed a request for notice of 19 proposed action with the commissioner of administration; and 20 (4) furnished to each member of the legislature and to the Legislative 21 Affairs Agency. 22 (e) Failure to mail notice to a person as required under (d)(3) of this section 23 does not invalidate an action taken by the commissioner of administration. 24 (f) The commissioner of administration may hold a hearing on a proposed 25 regulation. 26 (g) A regulation adopted under this chapter takes effect 30 days after adoption 27 by the commissioner of administration. 28 (h) Notwithstanding the other provisions of this section, a regulation may be 29 adopted, amended, or repealed, effective immediately, as an emergency regulation by 30 the commissioner of administration. For an emergency regulation to be effective the 31 commissioner must find that the adoption, amendment, or repeal of the regulation is

01 necessary for the immediate preservation of the orderly operation of the system. The 02 commissioner shall, within 10 days after adoption of an emergency regulation, give 03 notice of the adoption under (d) of this section. 04 (i) In this section, "regulation" has the meaning given in AS 44.62.640(a). 05 Sec. 14.25.006. Appeals. An employer, member, annuitant, or beneficiary 06 may appeal a decision made by the administrator to the office of administrative 07 hearings established under AS 44.64. An aggrieved party may appeal a final decision 08 to the superior court. 09 Sec. 14.25.007. Investment management of retirement system funds. The 10 Alaska Retirement Management Board established under AS 37.10.210 is the 11 fiduciary of the system funds. 12 Sec. 14.25.008. Definitions. In AS 14.25.001 - 14.24.008, 13 (1) "plan" means a retirement plan established in this chapter; 14 (2) "system" means all retirement plans established under the teachers' 15 retirement system. 16 Article 2. Teachers' Defined Benefit Retirement Plan. 17 Sec. 14.25.009. Applicability of AS 14.25.009 - 14.25.220. The provisions of 18 AS 14.25.009 - 14.25.220 apply only to members first hired before July 1, 2006. 19 * Sec. 2. AS 14.25.010 is amended to read: 20 Sec. 14.25.010. Retirement plan [SYSTEM] established; federal 21 qualification requirements. (a) A joint-contributory retirement plan [SYSTEM] for 22 teachers of the state is created. 23 (b) The retirement plan [SYSTEM] established by AS 14.25.009 - 14.25.220 24 [THIS CHAPTER] is intended to qualify under 26 U.S.C. 401(a) and 414(d) (Internal 25 Revenue Code) as a qualified retirement plan established and maintained by the state 26 for its employees, for the employees of school districts and regional educational 27 attendance areas in the state, and for the employees of other employers whose 28 participation is authorized by AS 14.25.009 - 14.25.220 [THIS CHAPTER] and who 29 participate in this plan [SYSTEM]. 30 (c) An amendment to AS 14.25.009 - 14.25.220 [THIS CHAPTER] does not 31 provide a person with a vested right to a benefit if the Internal Revenue Service

01 determines that the amendment will result in disqualification of the plan under the 02 Internal Revenue Code. 03 * Sec. 3. AS 14.25.012(b) is amended to read: 04 (b) The plan [SYSTEM] created in AS 14.25.009 - 14.25.220 became 05 effective as of July 1, 1955, at which time contributions by the participating employers 06 and members began. 07 * Sec. 4. AS 14.25.012 is amended by adding a new subsection to read: 08 (c) Employees first hired after June 30, 2006, are not eligible to participate in 09 the plan established in AS 14.25.009 - 14.25.220. 10 * Sec. 5. AS 14.25.040(a) is amended to read: 11 (a) Unless a teacher or member participates in a [HAS ELECTED TO 12 PARTICIPATE IN THE OPTIONAL] university retirement program under 13 AS 14.40.661 - 14.40.799 or has filed an election under AS 14.25.043(b), a teacher or 14 member contracting for service with a participating employer is subject to 15 AS 14.25.009 - 14.25.220 [THIS CHAPTER]. 16 * Sec. 6. AS 14.25.040(a) is amended to read: 17 (a) Unless a teacher or member participates in a university retirement program 18 under AS 14.40.661 - 14.40.799, [OR] has filed an election under AS 14.25.043(b), or 19 has elected to participate in the plan established in AS 14.25.310 - 14.25.590, a 20 teacher or member contracting for service with a participating employer is subject to 21 AS 14.25.009 - 14.25.220. 22 * Sec. 7. AS 14.25.040(d) is amended to read: 23 (d) A person who is employed at least half-time in the plan [SYSTEM] during 24 the same period that the person is employed at least half-time in a position in the 25 public employees' retirement plan [SYSTEM] under AS 39.35.095 - 39.35.680 26 [AS 39.35] shall receive credited service under each plan [SYSTEM] for half-time 27 employment. However, the amount of credited service a person receives under the 28 public employees' retirement plan [SYSTEM] during a school year may not exceed 29 the amount necessary, when added to the amount of credited service earned during the 30 school year under the plan [SYSTEM], to equal one year of credited service. A 31 person who was employed at least half-time in a position in the public employees'

01 retirement plan [SYSTEM] under AS 39.35.095 - 39.35.680 [AS 39.35] in the same 02 period that the person was employed at least half-time in a position in this plan 03 [SYSTEM] may claim credited service in both plans [SYSTEMS] for employment 04 before May 31, 1989. To obtain this credited service, the person shall claim the 05 service and verify the period of half-time employment. When eligibility for half-time 06 service credit has been established, an indebtedness shall be determined to the 07 retirement plan [SYSTEM] in which the person did not participate. The amount of 08 the indebtedness is the full actuarial cost of providing benefits for the credited service 09 claimed. Interest as prescribed by regulation accrues on that indebtedness beginning 10 on the later of July 1, 1989, or the date on which the member is first eligible to claim 11 the service. Any outstanding indebtedness existing at the time the person retires will 12 require an actuarial adjustment to the benefits payable based on that service. 13 * Sec. 8. AS 14.25.070 is repealed and reenacted to read: 14 Sec. 14.25.070. Contributions by employer. An employer shall make 15 contributions to the plan in an amount sufficient, after subtracting member 16 contributions, to provide the benefits of AS 14.25.009 - 14.25.220. The amount shall 17 be calculated by applying an employer contribution rate, certified by the board, against 18 the sum total of the base salaries paid to members, including any adjustments to 19 contributions required by AS 14.25.173(a). 20 * Sec. 9. AS 14.25.070 is amended by adding a new subsection to read: 21 (b) The employer contribution rate may not be less than the rate required, after 22 subtracting the member contribution rate, to fully fund the actuarially calculated 23 benefits expected to be earned by active members during a fiscal year. 24 * Sec. 10. AS 14.25.075(a) is amended to read: 25 (a) An employee who is eligible to purchase credited service under 26 AS 14.25.047 or 14.25.048, a member who is eligible to purchase credited service 27 under AS 14.25.048, 14.25.050, 14.25.060, 14.25.061, [14.25.062,] 14.25.100, or 28 14.25.107, or a teacher who is eligible to purchase credited service under 29 AS 14.20.345, AS 14.25.050, [14.25.062,] or 14.25.105, in lieu of making payments 30 directly to the plan, may elect to have the member's employer make payments as 31 provided in this section.

01 * Sec. 11. AS 14.25.075(b) is amended to read: 02 (b) A member may elect to have the employer make payments for all or any 03 portion of the amounts payable for the member's purchase of credited service through 04 a salary reduction program as follows: 05 (1) the amounts paid under a salary reduction program are in lieu of 06 contributions by the member making the election; the electing member's salary or 07 other compensation shall be reduced by the amount paid by the employer under this 08 subsection; 09 (2) the member shall make an irrevocable election under this 10 subsection to purchase credited service as permitted in AS 14.20.345, AS 14.25.047, 11 14.25.048, 14.25.050, 14.25.060, 14.25.061, [14.25.062,] 14.25.100, 14.25.105, or 12 14.25.107 before the member's termination of employment; the irrevocable election 13 must specify the number of payroll periods that deductions will be made from the 14 member's compensation and the dollar amount of deductions for each payroll period 15 during the specified number of payroll periods; the deductions made under this 16 paragraph cease upon the earlier of the member's termination of employment with the 17 employer or the member's death; amounts paid by an employer under (f) of this 18 section may not be applied toward the payment of the dollar amount of the deductions 19 representing the portion of the credited service that is being purchased by the member 20 through payroll deduction in accordance with the member's irrevocable election under 21 this paragraph; 22 (3) amounts paid by an employer under this subsection shall be treated 23 as employer contributions for the purpose of determining tax treatment under 26 24 U.S.C. (Internal Revenue Code); the amounts paid by the employer under this section 25 may not be included in the member's gross income for income tax purposes until those 26 amounts are distributed by refund or retirement benefit payments. 27 * Sec. 12. AS 14.25.075(e) is amended to read: 28 (e) Contributions to the plan [SYSTEM] to purchase credited service under 29 this section do not qualify for treatment under this section if recognition of that service 30 would cause a member to receive a retirement benefit for the same service from the 31 plan [SYSTEM] and from one or more other retirement plans or systems of the state.

01 * Sec. 13. AS 14.25.075(f) is amended to read: 02 (f) The administrator may accept rollover contributions from a member [, 03 AND DIRECT TRANSFERS AS DESCRIBED IN THIS SUBSECTION, FOR THE 04 PURCHASE, IN WHOLE OR IN PART, OF FORFEITED CREDITED SERVICE 05 UNDER THIS SECTION FOR THE REINSTATEMENT, IN WHOLE OR IN PART, 06 OF FORFEITED CREDITED SERVICE UNDER AS 14.25.062]. Contributions 07 made under this subsection may not be applied to purchase service being paid under 08 (b) of this section. A rollover contribution [OR TRANSFER] as described in this 09 subsection shall be treated as employer contributions for the purpose of determining 10 tax treatment under the Internal Revenue Code and may be made by any one or a 11 combination of the following methods: 12 (1) subject to the limitations prescribed in 26 U.S.C. 402(c), accepting 13 eligible rollover distributions directly from one or more retirement programs of 14 another employer that are qualified under 26 U.S.C. 401(a) or accepting rollovers 15 directly from a member; 16 (2) subject to the limitations prescribed in 26 U.S.C. 408(d)(3)(A)(ii), 17 accepting from a member conduit rollover contributions that are received by the 18 member from one or more conduit rollover individual retirement accounts previously 19 established by the member; 20 (3) subject to the limitations prescribed in 26 U.S.C. 403(b)(13), 21 accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the 22 member, on or after January 1, 2002, from a tax sheltered annuity described in 26 23 U.S.C. 403(b); 24 (4) subject to the limitations prescribed in 26 U.S.C. 457(e)(17), 25 accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the 26 member, on or after January 1, 2002, from an eligible deferred compensation plan of a 27 tax-exempt organization or a state or local government described in 26 U.S.C. 457(b); 28 (5) accepting direct trustee-to-trustee transfer from an account 29 established for the benefit of the member in AS 39.30.150 - 39.30.180 (Alaska 30 Supplemental Annuity Plan). 31 * Sec. 14. AS 14.25.075(i) is amended to read:

01 (i) On satisfaction of the eligibility requirements of AS 14.20.345, 02 AS 14.25.047, 14.25.048, 14.25.050, 14.25.060, 14.25.061, [14.25.062,] 14.25.100, 03 14.25.105, or 14.25.107, the requirements of this section, and the administrative filing 04 requirements specified by the administrator, the plan shall adjust the member's 05 credited service history and add any additional service credits acquired. 06 * Sec. 15. AS 14.25.115(a) is amended to read: 07 (a) A teacher in membership service on or after July 1, 1977, who is appointed 08 to retirement on or after July 1, 1978, may elect to apply unused sick leave credit in 09 computing the total number of years of credited service under AS 14.25.110(d) except 10 for sick leave earned while participating in a [THE OPTIONAL] university retirement 11 program under AS 14.40.661 - 14.40.799. To obtain service credit for unused sick 12 leave, a teacher must apply to the administrator not [NO] later than one year after 13 appointment to retirement. Unused sick leave shall be credited on a day-for-day basis 14 in accordance with the table for service after July 1, 1969, contained in 15 AS 14.25.220(45). Teacher contributions may not be required for credited unused sick 16 leave. 17 * Sec. 16. AS 14.25.143(a), as that subsection read following amendment by sec. 3, ch. 18 146, SLA 1980, until amended by sec. 12, ch. 106, SLA 1988, is amended to read: 19 (a) When the administrator determines that the cost of living has increased and 20 that the financial condition of the retirement fund permits, the administrator shall 21 increase benefit payments to persons receiving benefits under this plan. For 22 purposes of this subsection, the financial condition of the fund would only permit 23 an increase in benefits when the ratio of total fund assets to the accrued liability 24 meets or exceeds 105 percent. In this subsection, "accrued liability" means the 25 present value of all member benefits accrued by member service in this plan 26 [SYSTEM]. 27 * Sec. 17. AS 14.25.143(a), as that subsection read following amendment by sec. 12, ch. 28 106, SLA 1988, until amended by sec. 12, ch. 97, SLA 1990, is amended to read: 29 (a) When the administrator determines that the cost of living has increased and 30 that the financial condition of the retirement fund [SYSTEM] permits, the 31 administrator shall increase benefit payments to persons receiving benefits under this

01 plan. For purposes of this subsection, the financial condition of the fund would 02 only permit an increase in benefits when the ratio of total fund assets to the 03 accrued liability meets or exceeds 105 percent. In this subsection, "accrued 04 liability" means the present value of all member benefits accrued by member 05 service in this plan [SYSTEM]. 06 * Sec. 18. AS 14.25.145 is amended to read: 07 Sec. 14.25.145. Interest on individual accounts. Interest shall be credited to 08 each teacher's account at the end of each school year at the rate prescribed by the 09 board [REGULATION] for that year. 10 * Sec. 19. AS 14.25.150 is amended by adding a new subsection to read: 11 (c) A member who has received a refund of contributions in accordance with 12 this section forfeits corresponding credited service under AS 14.25.009 - 14.25.220. 13 * Sec. 20. AS 14.25.168(a) is repealed and reenacted to read: 14 (a) Except as provided in (c) of this section, the following persons are entitled 15 to major medical insurance coverage under this section: 16 (1) for teachers first hired before July 1, 1990, 17 (A) a teacher who is receiving a monthly benefit from the plan 18 and who has elected coverage; 19 (B) the spouse and dependent children of the teacher described 20 in (A) of this paragraph; 21 (C) the surviving spouse of a deceased teacher who is receiving 22 a monthly benefit from the plan and who has elected coverage; 23 (D) the dependent children of a deceased teacher who are 24 dependent on the surviving spouse described in (C) of this paragraph; 25 (2) for teachers first hired on or after July 1, 1990, 26 (A) a teacher who is receiving a monthly benefit from the plan 27 and who has elected coverage for the teacher; 28 (B) the spouse of the teacher described in (A) of this paragraph 29 if the teacher elected coverage for the spouse; 30 (C) the dependent children of the teacher described in (A) of 31 this paragraph if the teacher elected coverage for the dependent children;

01 (D) the surviving spouse of a deceased teacher who is receiving 02 a monthly benefit from the plan and who has elected coverage; 03 (E) the dependent children of a deceased teacher who are 04 dependent on the surviving spouse described in (D) of this paragraph if the 05 surviving spouse has elected coverage for the dependent children. 06 * Sec. 21. AS 14.25.173(c) is amended to read: 07 (c) At least quarterly, [AT EACH REGULARLY SCHEDULED MEETING 08 OF THE TEACHERS' RETIREMENT BOARD,] the administrator shall report to the 09 commissioner of administration [BOARD] on all situations since the administrator's 10 last report in which an adjustment has been prohibited under (b) of this section. If the 11 commissioner of administration [BOARD] finds that there is reason to believe that 12 one or more of the conditions set out in (b) of this section have not been met, the 13 administrator shall notify the member or beneficiary that an adjustment will be made 14 to recover the overpayment. A member or beneficiary who receives notice of 15 adjustment under this subsection may file a request with the commissioner of 16 administration [APPEAL TO THE BOARD] for a waiver of the adjustment under 17 AS 14.25.175. An adjustment that requires the repayment of benefits may not be 18 required while the waiver request [APPEAL] is pending. 19 * Sec. 22. AS 14.25.175(a) is amended to read: 20 (a) Upon request [APPEAL] by an affected member or beneficiary under (b) 21 of this section, the commissioner of administration [BOARD] may waive an 22 adjustment or a portion of an adjustment made under AS 14.25.173 if, in the opinion 23 of the commissioner of administration [BOARD], 24 (1) the adjustment or portion of the adjustment will cause undue 25 hardship to the member or beneficiary; 26 (2) the adjustment was not the result of erroneous information supplied 27 by the member or beneficiary; 28 (3) before the adjustment was made, the member or beneficiary 29 received confirmation from the administrator that the member's or beneficiary's 30 records were correct; and 31 (4) the member or beneficiary had no reasonable grounds to believe

01 the records were incorrect before the adjustment was made. 02 * Sec. 23. AS 14.25.175(b) is amended to read: 03 (b) In order to obtain consideration of a waiver under this section, the affected 04 member or beneficiary shall file a request with [MUST APPEAL TO] the 05 commissioner of administration [BOARD] in writing within 30 days after receipt of 06 notice that the records have been adjusted. The ruling of the commissioner of 07 administration [BOARD] shall be in writing. 08 * Sec. 24. AS 14.25.175(c) is repealed and reenacted to read: 09 (c) A ruling of the commissioner of administration to deny a waiver under (b) 10 of this section may be appealed to the office of administrative hearings. 11 * Sec. 25. AS 14.25.175(d) is amended to read: 12 (d) The office of administrative hearings [BOARD] may reverse the 13 commissioner of administration's decision to deny a waiver and may impose 14 conditions on granting a waiver that it considers equitable. These conditions may 15 include requiring the member or beneficiary to make additional contributions to the 16 plan [SYSTEM]. 17 * Sec. 26. AS 14.25.210(a) is amended to read: 18 (a) A person who knowingly makes a false statement, or falsifies or permits to 19 be falsified any record of this plan [SYSTEM], in an attempt to defraud this plan 20 [SYSTEM], is guilty of a class A misdemeanor [AND FORFEITS ALL RIGHTS 21 UNDER THIS CHAPTER]. 22 * Sec. 27. AS 14.25.220(2) is amended to read: 23 (2) "actuarial adjustment" means the adjustment necessary to obtain 24 equality in value of the aggregate expected payments under two different forms of 25 pension payments, considering expected mortality and interest earnings on the basis of 26 assumptions, factors, and methods specified in regulations issued under the plan 27 [SYSTEM] that are formally adopted [UNDER AS 14.25.022] by the board and that 28 clearly preclude employer discretion in the determination of the amount of any 29 member's benefit; 30 * Sec. 28. AS 14.25.220(3) is amended to read: 31 (3) "administrator" means the [PERSON APPOINTED BY THE]

01 commissioner of administration or the commissioner's designee under AS 14.25.003 02 [AS 14.25.015]; 03 * Sec. 29. AS 14.25.220(9) is amended to read: 04 (9) "board" means the Alaska Retirement Management [ALASKA 05 TEACHERS' RETIREMENT] Board established under AS 37.10.210 [AS 14.25.035]; 06 * Sec. 30. AS 14.25.220(40) is amended to read: 07 (40) "supplemental contribution account" means the account 08 maintained by the plan [SYSTEM] to record the supplemental contributions of each 09 member, including interest and adjustments to the account [IN ACCORDANCE 10 WITH AS 14.25.170]; 11 * Sec. 31. AS 14.25.220(42) is amended to read: 12 (42) "teacher" and "member" are used interchangeably under this 13 chapter and mean a person eligible to participate in the system and who is covered by 14 the system, limited to 15 (A) a certificated full-time or part-time elementary or 16 secondary teacher, a certificated school nurse, or a certificated person in a 17 position requiring a teaching certificate as a condition of employment in a 18 public school of the state, the Department of Education and Early 19 Development, or the Department of Labor and Workforce Development; 20 (B) a full-time or part-time teacher of the University of Alaska 21 or a person occupying a full-time administrative position at the University of 22 Alaska that requires academic standing; the approval of the administrator must 23 be obtained before an administrative position qualifies for membership in the 24 system; however, a teacher or administrative person at the university who is 25 participating in a [THE OPTIONAL] university retirement program under 26 AS 14.40.661 - 14.40.799 is not a member under this system; 27 (C) a state legislator who elects membership under 28 AS 14.25.040(b); 29 * Sec. 32. AS 14.25.220 is amended by adding a new paragraph to read: 30 (46) "plan" means the retirement benefit plan established under 31 AS 14.25.009 - 14.25.220.

01 * Sec. 33. AS 14.25 is amended by adding new sections to read: 02 Article 3. Teachers First Hired on or after July 1, 2006. 03 Sec. 14.25.310. Applicability of AS 14.25.310 - 14.25.590. The provisions of 04 AS 14.25.310 - 14.25.590 apply only to teachers who first become members on or 05 after July 1, 2006, or to members who transfer into the defined contribution plan under 06 AS 14.25.540. 07 Sec. 14.25.320. Defined contribution retirement plan established. (a) A 08 defined contribution retirement plan for teachers of the state is created. 09 (b) The defined contribution retirement plan includes a plan in which savings 10 are accumulated in an individual account for the exclusive benefit of the member or 11 beneficiaries. The plan is established effective July 1, 2006, at which time 12 contributions by employers and members begin. 13 (c) The defined contribution retirement plan is intended to qualify under 26 14 U.S.C. 401(a) and 414(d) (Internal Revenue Code) as a qualified retirement plan 15 established and maintained by the state for its employees and for the employees of 16 school districts and regional educational attendance areas in the state. 17 (d) An amendment to the defined contribution retirement plan does not 18 provide a person with a vested right to a benefit if the Internal Revenue Service 19 determines that the amendment will result in disqualification of the plan under the 20 Internal Revenue Code. 21 Sec. 14.25.330. Membership. (a) A teacher who first becomes a member on 22 or after July 1, 2006, shall participate in the plan as a member of the defined 23 contribution retirement plan. 24 (b) A teacher who is participating in a university retirement program under 25 AS 14.40.661 - 14.40.799 may not participate as a member of the defined contribution 26 retirement plan. 27 Sec. 14.25.340. Contributions by members. (a) Each member shall 28 contribute to the member's individual account an amount equal to eight percent of the 29 member's compensation from July 1 to the following June 30. 30 (b) Subject to the limitations on contributions under AS 14.25.380, a member 31 may elect to make additional contributions to the member's individual account.

01 (c) The employer shall deduct the contribution from the member's 02 compensation at the end of each payroll period, and the contribution shall be credited 03 by the administrator to the member's individual account. The contributions shall be 04 deducted from member's compensation before the computation of applicable federal 05 taxes and shall be treated as employer contributions under 26 U.S.C. 414(h)(2). A 06 member may not have the option of making the payroll deduction directly in cash 07 instead of having the contribution picked up by the employer. 08 Sec. 14.25.345. Employment contributions mandatory. (a) Contributions 09 of members shall be made by payroll deductions. Each member shall be considered to 10 consent to payroll deductions. It is of no consequence that a payroll deduction may 11 cause the compensation paid in cash to a member to be reduced below the minimum 12 required by law. 13 (b) Payment of a member's compensation, less payroll deductions, is a full and 14 complete discharge and satisfaction of all claims and demands by the member relating 15 to remuneration of services during the period covered by the payment, except with 16 respect to the benefits provided under the plan. 17 Sec. 14.25.350. Contributions by employers. (a) An employer shall 18 contribute to each member's individual account an amount equal to five percent of the 19 member's compensation from July 1 to the following June 30. 20 (b) An employer shall also contribute an amount equal to a percentage, as 21 certified by the board, of each member's compensation from July 1 to the following 22 June 30 to pay for retiree major medical insurance. This contribution shall be paid 23 into the group health and life benefits fund established by the commissioner of 24 administration under AS 39.30.095 and shall be accounted for in accordance with 25 regulations established by the commissioner. 26 (c) Notwithstanding (b) of this section, the employer contribution for retiree 27 major medical insurance for fiscal year 2006 shall be 1.75 percent of each member's 28 compensation from July 1 to the following June 30. 29 (d) An employer shall also make contributions to the health reimbursement 30 arrangement plan under AS 39.30.300. 31 Sec. 14.25.360. Rollover contributions and distributions. (a) A teacher

01 entering the plan may elect, at the time and in the manner prescribed by the 02 administrator, to have all or part of a direct rollover distribution from an eligible 03 retirement plan owned by the member paid directly into the member's individual 04 account. 05 (b) Rollover contributions do not count as a purchase of membership service 06 for the purpose of determining years of service. 07 (c) A distributee may elect, at the time and in the manner prescribed by the 08 administrator, to have all or part of a direct rollover distribution paid directly to an 09 eligible retirement plan specified by the distributee in the direct rollover. 10 (d) In this section, 11 (1) "direct rollover" means the payment of an eligible rollover 12 distribution by the plan to an eligible retirement plan specified by a distributee who is 13 eligible to elect a direct rollover; 14 (2) "distributee" means a member, or a beneficiary who is the 15 surviving spouse of the member, or an alternate payee; 16 (3) "eligible retirement plan" means 17 (A) a conduit individual retirement account described in 26 18 U.S.C. 408(d)(3)(A); 19 (B) an annuity plan described in 26 U.S.C. 403(a); 20 (C) a qualified trust described in 26 U.S.C. 401(a); 21 (D) an annuity plan described in 26 U.S.C. 403(b); or 22 (E) a governmental plan described in 26 U.S.C. 457(b); 23 (4) "eligible rollover distribution" means a distribution of all or part of 24 a total account to a distributee, except for 25 (A) a distribution that is one of a series of substantially equal 26 installments payable not less frequently than annually over the life expectancy 27 of the distributee or the joint and last survivor life expectancy of the distributee 28 and the distributee's designated beneficiary, as defined in 26 U.S.C. 401(a)(9); 29 (B) a distribution that is one of a series of substantially equal 30 installments payable not less frequently than annually over a specified period 31 of 10 years or more;

01 (C) a distribution that is required under 26 U.S.C. 401(a)(9); 02 (D) the portion of any distribution that is not includable in 03 gross income; 04 (E) a distribution that is on account of hardship; and 05 (F) other distributions that are reasonably expected to total less 06 than $200 during a year. 07 Sec. 14.25.370. Transmittal of contributions. All contributions deducted in 08 accordance with AS 14.25.310 - 14.25.590 shall be transmitted to the plan for deposit 09 in the trust fund as soon as administratively feasible, but in no event later than 15 days 10 following the close of the payroll period. 11 Sec. 14.25.380. Limitations on contributions. Notwithstanding any other 12 provisions of this plan, the annual additions to each member's individual account 13 under this plan and under all defined contribution plans of the employer required to be 14 aggregated with the contributions from this plan under the provisions of 26 U.S.C. 415 15 may not exceed, for any limitation year, the amount permitted under 26 U.S.C. 415 at 16 any time. If the amount of a member's defined contribution plan contributions exceeds 17 the limitation of 26 U.S.C. 415(c) for any limitation year, the administrator shall take 18 any necessary remedial action to correct an excess contribution. The provisions of 26 19 U.S.C. 415, and the regulations adopted under that statute, as applied to qualified 20 defined contribution plans of governmental employees are incorporated as part of the 21 terms and conditions of the plan. 22 Sec. 14.25.390. Vesting. (a) A participating member is immediately and 23 fully vested in that member's contributions and related earnings. 24 (b) A member is fully vested in the employer contributions made on that 25 member's behalf, and related earnings, after five years of service. A member is 26 partially vested in the employer contributions made on that member's behalf, and the 27 related earnings, in the ratio of 28 (1) 25 percent with two years of service; 29 (2) 50 percent with three years of service; and 30 (3) 75 percent with four years of service. 31 Sec. 14.25.400. Investment of individual accounts. (a) The board shall

01 provide a range of investment options and permit a participant to exercise investment 02 control over the participant's assets in the member's individual account as provided in 03 this section. If a participant exercises control over the assets in the individual account, 04 the participant is not considered a fiduciary for any reason on the basis of exercising 05 that control. 06 (b) A participant may direct investment of plan funds held in an account 07 among available investment funds in accordance with rules established by the board. 08 (c) A participant may elect to change or transfer all or a portion of the 09 participant's existing account balance among available investment funds not more 10 often than once each day in accordance with the rules established by the administrator. 11 Only the last election received by the administrator before the transmittal of 12 contributions to the trust fund for allocation to the individual account will be used to 13 direct the investment of the contributions received. 14 (d) Except to the extent clearly set out in the terms of the investment plans 15 offered by the employer to the employee, the employer is not liable to the participant 16 for investment losses if the prudent investment standard has been met. 17 (e) The employer, administrator, state, board, or a person or entity who is 18 otherwise a fiduciary is not liable by reason for any participant's investment loss that 19 results from the participant's directing the investment of plan assets allocated to the 20 participant's account. 21 (f) To the extent that a member's individual account has been divided as 22 provided in a qualified domestic relations order between participants, each participant 23 shall be treated as the holder of a separate individual account for purposes of 24 investment yields, decisions, transfers, and time limitations imposed by this section. 25 Sec. 14.25.410. Distribution election at termination. (a) A member is 26 eligible to elect distribution of the member's account in accordance with this section 27 60 days after termination of employment. 28 (b) Notwithstanding (a) of this section, distribution of all or a portion of the 29 individual account of a member may take place before the 60th day after the 30 termination of employment with the approval of the administrator if the member 31 makes a written request for a distribution under this subsection. The member's spouse

01 must consent to the request in writing if the member is married. Distribution of an 02 individual account may only be made on account of an immediate and heavy financial 03 need of the member for the following reasons and in the amount the need is 04 demonstrated for 05 (1) medical care described in 26 U.S.C. 213(d) incurred by the 06 member, the member's spouse, or the member's dependent, or necessary to obtain that 07 medical care; 08 (2) the purchase of a principal residence for the member; 09 (3) postsecondary education tuition and related educational fees for the 10 next 12-month period for the member, the member's spouse, or a dependent of the 11 member; in this paragraph, "dependent" has the meaning given in 26 U.S.C. 152; 12 (4) prevention of the eviction of the member from the member's 13 principal residence or foreclosure on the mortgage of the member's principal 14 residence; or 15 (5) any need prescribed by the United States Department of the 16 Treasury, Internal Revenue Service, in a revenue ruling, notice, or other document of 17 general applicability that satisfies the safe harbor definition of hardship under 18 regulations adopted under 26 U.S.C. 401(k). 19 (c) If a member dies before benefits commence, the member's beneficiary is 20 immediately eligible to elect distribution of the member's share of the member's 21 individual account. 22 (d) Distributions are payable to an alternate payee in accordance with the 23 terms and conditions of a qualified domestic relations order that is received and 24 approved by the administrator as specified in AS 14.25.460. 25 (e) Distributions that are being paid to a member may not be affected by the 26 member's subsequent reemployment with the employer. Upon reemployment, a new 27 individual account shall be established for the member to which any future 28 contributions shall be allocated. Upon subsequent termination of employment, the 29 member's new individual account shall be distributed in accordance with this section. 30 Sec. 14.25.420. Forms of distribution. (a) A participant may elect to receive 31 distribution of the participant's share of the individual account in a

01 (1) lump sum payment, which is a single payment of the entire balance 02 in the account; 03 (2) periodic lump sum payment, which is a payment of a portion of the 04 balance in the account, not more than twice each year; 05 (3) period certain annuity payment, which is an annuity payable in a 06 fixed number of monthly installments for a duration of 60, 120, or 180 months; 07 (4) life annuity with a period certain payment, which is an annuity 08 payable until the later of the first day of the month in which the annuitant's death 09 occurs, or the date on which the payment of a fixed number of monthly installments is 10 completed; the period certain for installments is 120 or 180 months; 11 (5) single life annuity payment, which is an annuity payable monthly 12 until the first of the month in which the annuitant's death occurs; or 13 (6) joint and survivor annuity payment, which is an annuity payable 14 monthly to the member until the first of the month in which the member's death 15 occurs; after the member's death, a survivor annuity equal to 50 percent or 100 percent 16 of the member's benefit, as previously elected by the member, shall be paid monthly to 17 the joint annuitant for the remainder of the survivor's lifetime. 18 (b) Upon the death of an annuitant whose payments have commenced, an 19 annuitant's beneficiary shall receive further payments only to the extent provided in 20 accordance with the form of payment that was being made to the annuitant. The 21 remaining portion of the interest shall continue to be distributed at least as rapidly as 22 under the method of distribution being used before the annuitant's death. 23 (c) If a participant dies before the distribution commencement date, 24 distribution of the participant's entire interest to a beneficiary shall be payable in any 25 form other than a joint and survivor annuity. 26 (d) If an unmarried member or other participant fails to elect a form of 27 payment before the distribution commencement date, the account shall be paid to a 28 beneficiary in the form of a lump sum to the extent required by the minimum 29 distribution requirements set out in the Internal Revenue Code. If a married member 30 fails to elect a form of payment before the distribution commencement date, the 31 account shall be paid in the form of a 50 percent joint and survivor annuity, with the

01 member's spouse as the joint annuitant. 02 Sec. 14.25.430. Manner of electing distributions. (a) Any election or any 03 alteration or revocation of a prior election by a participant for any purpose under this 04 plan shall be on forms or made in a manner prescribed for that purpose by the plan 05 administrator. To be effective, the forms required or the required action for any 06 purpose under this plan must be completed and received in accordance with 07 regulations adopted by the commissioner of administration. 08 (b) At any time, but not less than seven days before the distribution 09 commencement date, a member, alternate payee, or beneficiary may change 10 (1) the form of payment election; 11 (2) an election to commence benefits; or 12 (3) the joint annuitant designation. 13 (c) Changes in elections are not allowed on or after seven days before the 14 distribution commencement date. 15 Sec. 14.25.440. Distribution requirements. (a) Payments to a participant 16 shall commence as soon as administratively feasible following the distribution 17 commencement date. The distribution commencement date is the first date on which 18 one of the following occurs: 19 (1) a member meets the requirements of AS 14.25.410 and has made a 20 complete application for payment under AS 14.25.430; 21 (2) a participant has elected to defer receipt of the account to a date 22 specified, the date has been attained, and the participant has made a complete 23 application for payment; 24 (3) a member attains normal retirement age and has not made an 25 application for payment or elected to defer receipt of the account to a date later than 26 normal retirement age; 27 (4) a member's beneficiary does not make an application for benefits 28 and five years have elapsed since the member's death; 29 (5) notwithstanding (a) of this section, a participant whose account has 30 a balance of $1,000 or less meets the requirements of AS 14.25.410, at which time the 31 participant must take payment of the participant's account.

01 (b) The entire interest of a participant must be distributed or must begin to be 02 distributed not later than the member's required beginning date. 03 (c) If a member dies after the distribution of the member's interest has begun 04 but before the distribution has been completed, the remaining portion of the interest 05 shall continue to be distributed at least as rapidly as under the method of distribution 06 being used before the member's death. 07 (d) If a member has made a distribution election and dies before the 08 distribution of the member's interest begins, distribution of the member's entire interest 09 shall be completed by December 31 of the calendar year containing the fifth 10 anniversary of the member's death. However, if any portion of the member's interest 11 is payable to a designated beneficiary, distributions may be made over the life of the 12 designated beneficiary or over a period certain not greater than the life expectancy of 13 the designated beneficiary, commencing on or before December 31 of the calendar 14 year immediately following the calendar year in which the member died, and, if the 15 designated beneficiary is the member's surviving spouse, the date distributions are 16 required to begin may not be earlier than the later of December 31 of the calendar year 17 (1) immediately following the calendar year in which the member died, or (2) in which 18 the member would have attained 70 1/2 years of age, whichever is earlier. If the 19 surviving spouse dies after the member but before payments to the spouse have begun, 20 the provisions of this subsection apply as if the surviving spouse were the member. 21 An amount paid to a child of the member shall be treated as if it were paid to the 22 surviving spouse if the amount becomes payable to the surviving spouse when the 23 child reaches the age of majority. 24 (e) If a member has not made a distribution election before the member's 25 death, the member's designated beneficiary must elect the method of distribution not 26 later than December 31 of the calendar year (1) in which distributions would be 27 required to begin under this section, or (2) that contains the fifth anniversary of the 28 date of death of the member, whichever is earlier. If the member does not have a 29 designated beneficiary or if the designated beneficiary does not elect a method of 30 distribution, distribution of the member's entire interest must be completed by 31 December 31 of the calendar year containing the fifth anniversary of the member's

01 death. 02 (f) For purposes of (b) of this section, distribution of a member's interest is 03 considered to begin (1) on the member's required beginning date, or (2) if the 04 designated beneficiary is the member's surviving spouse and the surviving spouse dies 05 after the member but before payments to the spouse have begun, on the date 06 distribution is required to begin to the surviving spouse. If distribution in the form of 07 an annuity irrevocably commences to the member before the required beginning date, 08 the date distribution is considered to begin is the date that the distribution actually 09 commences. 10 (g) Notwithstanding any contrary provisions of AS 14.25.310 - 14.25.590, the 11 requirements of this section apply to all distributions of a member's interest and take 12 precedence over any inconsistent provisions of AS 14.25.310 - 14.25.590. 13 (h) All distributions required under this section are determined and made in 14 accordance with 26 U.S.C. 401(a)(9) and regulations adopted under that statute, 15 including any minimum distribution incidental benefit requirement. 16 (i) In this section, 17 (1) "designated beneficiary" means the individual who is designated as 18 the beneficiary under the plan in accordance with 26 U.S.C. 401(a)(9) and regulations 19 adopted under that statute; 20 (2) "required beginning date" means the first day of April of the 21 calendar year following the calendar year in which the member either attains 70 1/2 22 years of age or actually terminates employment, whichever is later. 23 Sec. 14.25.450. Designation of beneficiary. (a) Each participant shall have 24 the right to designate a beneficiary and shall have the right, at any time, to revoke the 25 designation or to substitute another beneficiary, subject to the following limitation: if 26 a married member elects a nonspouse beneficiary, the value of the benefit payable to 27 the beneficiary may not exceed 50 percent of the member's portion of the account 28 balance, and the member's spouse shall automatically be considered the beneficiary for 29 the remaining 50 percent of the account balance, unless the spouse consents to the 30 beneficiary designation in a writing that is notarized or witnessed by the administrator. 31 If the spouse consents in this manner, a married member may designate a nonspouse

01 beneficiary for the entire benefit or any portion of the benefit as part of an available 02 form of payment contained in this plan, 03 (1) except to the extent a qualified domestic relations order filed with 04 the administrator provides for payment to a former spouse or other dependent of the 05 member; or 06 (2) unless the member filed a revocation of beneficiary accompanied 07 by a written consent to the revocation from the present spouse and each person entitled 08 under the order; however, consent of the present spouse is not required if the member 09 and the present spouse had been married for less than one year on the date of the 10 member's death and if the member established when filing the revocation that the 11 member and the present spouse were not cohabiting. 12 (b) Except as provided in (a) of this section, the member may change or 13 revoke the designation without notice to the beneficiary or beneficiaries at any time. 14 If a member designates more than one beneficiary, each shares equally unless the 15 member specifies a different allocation or preference. The designation of a 16 beneficiary, a change or revocation of a beneficiary, and a consent to revocation of a 17 beneficiary shall be made on a form provided by the administrator and is not effective 18 until filed with the administrator. 19 (c) If a member fails to designate a beneficiary, or if no designated beneficiary 20 survives the member, the death benefit shall be paid 21 (1) to the surviving spouse or, if there is none surviving; 22 (2) to the surviving children of the member in equal parts or, if there 23 are none surviving; 24 (3) to the surviving parents in equal parts or, if there are none 25 surviving; 26 (4) to the estate. 27 (d) A person claiming entitlement to benefits payable under AS 14.25.310 - 28 14.25.590 as a consequence of a member's death shall provide the administrator with a 29 marriage certificate, divorce or dissolution judgment, or other evidence of entitlement. 30 Documents establishing entitlement may be filed with the administrator immediately 31 after a change in the member's marital status. If the administrator does not receive

01 notification of a claim before the date 10 days after the member's death, the person 02 claiming entitlement is not entitled to receive from the division of retirement and 03 benefits any benefit already paid by the administrator. 04 Sec. 14.25.460. Rights under qualified domestic relations order. (a) 05 Notwithstanding the nonalienation provisions in AS 14.25.500(a), the administrator 06 may direct that benefits be paid to someone other than a member or beneficiary under 07 a valid qualified domestic relations order that is executed by the judge of a competent 08 court in accordance with applicable state law and that has been accepted by the 09 administrator. 10 (b) The administrator shall determine whether an order meets the requirements 11 of this section within a reasonable period after receiving an order. The administrator 12 shall notify the member and any alternate payee that an order has been received and 13 indicate to the member and any alternate payee when the order is accepted. A separate 14 account for the alternate payee portion shall be established as soon as administratively 15 feasible after the order has been accepted by the administrator. 16 Sec. 14.25.470. Retirement. (a) In order to obtain medical benefits under 17 AS 14.25.480 a member must retire directly from the plan. A member is eligible to 18 retire from the plan if the member has been an active member for at least 12 months 19 before application for retirement and 20 (1) the member has at least 30 years of service; or 21 (2) the member reaches the normal retirement age and has at least 10 22 years of service. 23 (b) The normal retirement age is the age set for Medicare eligibility at the time 24 the member retires. 25 (c) A member's surviving spouse is eligible to elect medical benefits under 26 AS 14.25.480 if the member had retired, or was eligible for appointment to retirement 27 at the time of the member's death. 28 (d) A member shall apply for appointment to retirement on the forms and in 29 the manner prescribed by the administrator. 30 (e) Election of the retiree major medical insurance plan is not required in order 31 to elect participation in the health reimbursement arrangement.

01 (f) A person eligible to elect medical benefits is not required to participate in 02 the health reimbursement arrangement in order to elect participation in the retiree 03 major medical insurance plan. 04 (g) An eligible person shall make the irrevocable election to participate or not 05 participate in the retiree major medical insurance plan by reaching 70 1/2 years of age, 06 or upon termination of the member's employment, whichever is later. 07 Sec. 14.25.480. Medical benefits. (a) The medical benefits available to 08 eligible persons are access to the retiree major medical insurance plan and to the 09 health reimbursement arrangement under AS 39.30.300. Access to the retiree major 10 medical insurance plan means that an eligible person may not be denied insurance 11 coverage except for failure to pay the required premium. 12 (b) Retiree major medical insurance plan coverage elected by an eligible 13 member under this section covers the eligible member, the spouse of the eligible 14 member, and the dependent children of the eligible member. 15 (c) Retiree major medical insurance plan coverage elected by a surviving 16 spouse of an eligible member under this section covers the surviving spouse and the 17 dependent children of the eligible member who are dependent on the surviving spouse. 18 (d) Major medical insurance coverage takes effect on the first day of the 19 month following the date of the administrator's approval of the election and stops 20 when the person who elects coverage dies or fails to make a required premium 21 payment. 22 (e) The coverage for persons 65 years of age or older is the same as that 23 available for persons under 65 years of age. The benefits payable to those persons 65 24 years of age or older supplement any benefits provided under the federal old age, 25 survivors and disability insurance program. 26 (f) The medical and optional insurance premiums owed by the person who 27 elects coverage may be deducted from the health reimbursement arrangement. If the 28 amount of the health reimbursement arrangement becomes insufficient to pay the 29 premiums, the person who elects coverage under (a) of this section shall pay the 30 premiums directly. 31 (g) The cost of premiums for retiree major medical insurance coverage for an

01 eligible member or surviving spouse who is 02 (1) not eligible for Medicare is an amount equal to the full monthly 03 group premiums for retiree major medical insurance coverage; 04 (2) eligible for Medicare, is the following percentage of the premium 05 amounts established for retirees who are eligible for Medicare: 06 (A) 30 percent if the member had 10 or more, but less than 15, 07 years of service; 08 (B) 25 percent if the member had 15 or more, but less than 20, 09 years of service; 10 (C) 20 percent if the member had 20 or more, but less than 25, 11 years of service; 12 (D) 15 percent if the member had 25 or more, but less than 30, 13 years of service; 14 (E) 10 percent if the member had 30 or more years of service. 15 (h) The eligibility for retiree major medical insurance coverage for an 16 alternate payee under a qualified domestic relations order shall be determined based 17 on the eligibility of the member to elect coverage. The alternate payee shall pay the 18 full monthly premium for retiree major medical insurance coverage. 19 (i) A person who is entitled to retiree major medical insurance coverage shall 20 (1) be informed by the administrator in writing 21 (A) that the health insurance coverage available to retired 22 members may be different from the health insurance coverage provided to 23 employees; 24 (B) of time limits for selecting optional health insurance 25 coverage and whether the election is irrevocable; and 26 (2) indicate in writing on a form provided by the administrator that the 27 person has received the information required by this subsection and whether the 28 person has chosen to receive optional health insurance coverage. 29 (j) The monthly group premiums for retiree major medical insurance coverage 30 are established by the administrator in accordance with AS 39.30.095. Nothing in 31 AS 14.25.310 - 14.25.590 guarantees a person who elects coverage under (a) of this

01 section a monthly group premium rate for retiree major medical insurance coverage 02 other than the premium in effect for the month in which the premium is due for 03 coverage for that month. 04 (k) In this section, "health reimbursement arrangement" means the plan 05 established in AS 39.30.300. 06 Sec. 14.25.490. Amendment and termination of plan. (a) The state has the 07 right to amend the plan at any time and from time to time, in whole or in part, 08 including the right to make retroactive amendments referred to in 26 U.S.C. 401(b). 09 (b) The plan administrator may not modify or amend the plan retroactively in 10 such a manner as to reduce the benefits of any member accrued to date under the plan 11 by reason of contributions made before the modification or amendment except to the 12 extent that the reduction is permitted by the Internal Revenue Code. 13 (c) The state may, in its discretion, terminate the plan in whole or part at any 14 time without liability for the termination. If the plan is terminated, all investments 15 remain in force until all individual accounts have been completely distributed under 16 the plan, and, after all plan liabilities are satisfied, excess assets revert to the employer. 17 (d) Any contribution made by an employer to the plan because of a mistake of 18 fact must be returned to the employer by the administrator within one year after the 19 contribution or discovery, whichever is later. 20 Sec. 14.25.500. Exclusive benefit. (a) The corpus or income of the assets 21 held in trust as required by the plan may not be diverted or used for other than the 22 exclusive benefit of the participants. 23 (b) If plan benefits are provided through the distribution of annuity or 24 insurance contracts, any refunds or credits in excess of plan benefits due to dividends, 25 earnings, or other experience rating credits, or surrender or cancellation credits, shall 26 be paid to the trust fund. 27 (c) The assets of the plan may not be used to pay premiums or contributions of 28 the employer under another plan maintained by the employer. 29 Sec. 14.25.510. Nonguarantee of returns, rates, or benefit amounts. The 30 plan created by AS 14.25.310 - 14.25.590 is a defined contribution plan, not a defined 31 benefit plan. The amount of money in the account of a participant depends on the

01 amount of contributions and the rate of return from investments of the account that 02 varies over time. If benefits are paid in the form of an annuity, the benefit amount 03 payable is dependent on the amount of money in the account and the interest rates 04 applied and service fees charged by the annuity payor at the time benefits are first 05 paid. Nothing in this plan guarantees a participant 06 (1) a rate of return or interest rate other than that actually earned by the 07 account of the participant, less applicable administrative expenses; or 08 (2) an annuity based on interest rates or service charges other than 09 interest rates available from and service charges by the annuity payor in effect at the 10 time the annuity is paid. 11 Sec. 14.25.520. Nonguarantee of employment. The provisions of 12 AS 14.25.310 - 14.25.590 are not a contract of employment between an employer and 13 an employee, nor do they confer a right of an employee to be continued in the 14 employment of an employer, nor are they a limitation of the right of an employer to 15 discharge an employee with or without cause. 16 Sec. 14.25.530. Fraud. (a) A person who knowingly makes a false statement 17 or falsifies or permits to be falsified a record of this plan in an attempt to defraud the 18 plan is guilty of a class A misdemeanor. 19 (b) In this section, "knowingly" has the meaning given in AS 11.81.900(a). 20 Sec. 14.25.540. Transfer into defined contribution retirement plan by 21 nonvested members of defined benefit retirement plan. (a) Subject to (i) of this 22 section, an active member of the defined benefit retirement plan of the teachers' 23 retirement system is eligible to participate in the defined contribution retirement plan 24 established under AS 14.25.310 - 14.25.590 if that member has not vested. 25 Participation in the defined contribution retirement plan is in lieu of participation in 26 the defined benefit retirement plan established under AS 14.25.009 - 14.25.220. 27 (b) A member who has vested in a defined benefit retirement plan is not 28 eligible to transfer under this section. 29 (c) Each eligible member who elects to participate in the defined contribution 30 retirement plan shall have transferred to a new account the present value of the 31 member contribution account balance held in trust for the member under the defined

01 benefit retirement plan of the teachers' retirement system. A matching employer 02 contribution shall be made on behalf of that employee to the new account. 03 (d) Upon a transfer, all membership service previously earned under the 04 defined benefit retirement plan shall be nullified for purposes of entitlement to a future 05 benefit under the defined benefit retirement plan but shall be credited for purposes of 06 eligibility to elect medical benefits under AS 14.25.470. Membership service allowed 07 for credit toward medical benefits does not include any service credit purchased under 08 AS 14.25.075 for employment by an employer who is not a participating employer in 09 this chapter. 10 (e) An eligible member whose accounts are subject to a qualified domestic 11 relations order may not make an election to participate in the defined contribution 12 retirement plan under this subsection unless the qualified domestic relations order is 13 amended or vacated and court-certified copies of the order are received by the 14 administrator. 15 (f) As directed by the participant, the board shall transfer or cause to be 16 transferred the appropriate amounts to the designated account. The board shall 17 establish transfer procedures by regulation, but the actual transfer may not be later 18 than 30 days after the effective date of the member's participation in the defined 19 contribution retirement plan unless the major financial markets for securities available 20 for a transfer are seriously disrupted by an unforeseen event that also causes the 21 suspension of trading on any national securities exchange in the country where the 22 securities were issued. In that event, the 30-day period of time may be extended by a 23 resolution of the board of trustees. Transfers are not commissionable or subject to 24 other fees and may be in the form of securities or cash as determined by the board. 25 Securities shall be valued as of the date of receipt in the participant's account. 26 (g) If the board or the administrator receives notification from the United 27 States Department of the Treasury, Internal Revenue Service, that this section or a 28 portion of this section will cause the retirement system under this chapter, or a portion 29 of the retirement system under this chapter, to be disqualified for tax purposes under 30 the Internal Revenue Code, the portion that will cause the disqualification does not 31 apply, and the board and the administrator shall notify the presiding officers of the

01 legislature. 02 (h) The election to participate in the defined contribution retirement plan must 03 be made in writing on forms and in the manner prescribed by the administrator. 04 Before accepting an election to participate in the defined contribution retirement plan, 05 the administrator must provide the employee planning on making an election to 06 participate in the defined contribution retirement plan with information, including 07 calculations to illustrate the effect of moving the employee's retirement plan from the 08 defined benefit retirement plan to the defined contribution retirement plan as well as 09 other information to clearly inform the employee of the potential consequences of the 10 employee's election. An election made under this subsection to participate in the 11 defined contribution retirement plan is irrevocable. Upon making the election, the 12 participant shall be enrolled as a member of the defined contribution retirement plan, 13 the member's participation in the plan shall be governed by the provisions of 14 AS 14.25.310 - 14.25.590, and the member's participation in the defined benefit 15 retirement plan under AS 14.25.009 - 14.25.220 shall terminate. The participant's 16 enrollment in the defined contribution retirement plan shall be effective the first day of 17 the month after the administrator receives the completed enrollment forms. An 18 election made by an eligible member who is married is not effective unless the 19 election is signed by the individual's spouse. 20 (i) A member may make an election under this section only if the member's 21 employer participates in both the defined benefits retirement plan and the defined 22 contribution retirement plan and consents to transfers under this section. The 23 employer shall notify the administrator if the employer consents to allowing the 24 employer's members to choose to transfer from the defined benefits retirement plan to 25 the defined contribution retirement plan under this section. An employer's notice to 26 allow transfers is irrevocable and applicable to all eligible employees of the employer. 27 (j) In this section, 28 (1) "defined benefit retirement plan" means the retirement plan 29 established in AS 14.25.009 - 14.25.220; 30 (2) "defined contribution retirement plan" means the retirement plan 31 established in AS 14.25.310 - 14.25.590.

01 Sec. 14.25.550. Membership in teachers' and public employees' 02 retirement systems. A person who is employed at least half-time in the public 03 employees' defined contribution retirement plan (AS 39.35.700 - 39.35.990) during the 04 same period that the person is employed at least half-time in a position in the teachers' 05 defined contribution retirement plan (AS 14.25.310 - 14.25.590) shall receive credited 06 service under each plan for half-time employment. However, the amount of credited 07 service a person receives under the public employees' defined contribution retirement 08 plan during a school year may not exceed the amount necessary, when added to the 09 amount of credited service earned during the school year under the teachers' defined 10 contribution retirement plan, to equal one year of credited service. 11 Sec. 14.25.560. Legislators who have been teachers. (a) A state legislator 12 who was an active member of the defined contribution plan under other sections of 13 AS 14.25.310 - 14.25.590 within the 12 months immediately preceding election to 14 office may, subject to the requirements of (b) of this section, elect to be an active 15 member of the teachers' defined contribution retirement plan for as long as the state 16 legislator serves continuously as a state legislator if, within 90 days after taking the 17 oath of office, 18 (1) the state legislator directs the employer in writing to 19 (A) pay into this plan the employer contributions required for a 20 member under AS 14.25.310 - 14.25.590; and 21 (B) deduct from the state legislator's salary and pay into this 22 plan 23 (i) the employee contributions required for a member 24 under AS 14.25.310 - 14.25.590; and 25 (ii) an amount equal to the difference between the total 26 employer and state contributions required for a member under 27 AS 14.25.310 - 14.25.590 and the employer contributions that would be 28 required under the public employees' defined contribution retirement 29 plan (AS 39.35.700 - 39.35.990) if the legislator were covered under 30 that plan; and 31 (2) notice is given the administrator in writing.

01 (b) A state legislator is not entitled to elect membership under (a) of this 02 section if the state legislator is covered for the same period of service under the public 03 employees' defined contribution retirement plan (AS 39.35.700 - 39.35.990). An 04 election of membership under (a) of this section is retroactive to the date the state 05 legislator took the oath of office. A state legislator may not receive membership credit 06 under (a) of this section for legislative service performed before the legislative session 07 during which the state legislator elected membership under (a) of this section. In order 08 to continue in membership service under (a) of this section, the state legislator must 09 earn at least 0.3 years of membership service under other sections of AS 14.25.310 - 10 14.25.590 during each five-year period. 11 Sec. 14.25.570. Participation by National Education Association 12 employees. An employee or former employee of the National Education Association 13 of Alaska may participate in the teachers' defined contribution retirement plan under 14 AS 14.25.310 - 14.25.590 if the employee or former employee possesses or is eligible 15 to possess a teacher certificate under AS 14.20.020. 16 Sec. 14.25.580. Participation by Special Education Service Agency 17 employees. An employee of the Special Education Service Agency may participate in 18 the system under this chapter if the employee possesses or is eligible to possess a 19 teacher certificate under AS 14.20.020. 20 Sec. 14.25.590. Definitions. In AS 14.25.310 - 14.25.590, unless the context 21 requires otherwise, 22 (1) "administrator" has the meaning given in AS 14.25.220; 23 (2) "alternate payee" means a person entitled to a portion of the 24 distribution from an individual account under a qualified domestic relations order; 25 (3) "annuitant" means a member, beneficiary or alternate payee who is 26 receiving a benefit under this plan; 27 (4) "beneficiary" means the person or persons entitled to receive 28 benefits that may be due from the plan upon the death of the member or alternate 29 payee; 30 (5) "board" has the meaning given in AS 14.25.220; 31 (6) "calendar year" has the meaning given in AS 39.35.680;

01 (7) "compensation" 02 (A) means 03 (i) the total remuneration earned by an employee for 04 personal services rendered, including cost-of-living differentials, as 05 reported on the employee's Federal Income Tax Withholding Statement 06 (Form W-2) from the employer for the calendar year; 07 (ii) the member contribution to the teachers' retirement 08 system under AS 14.25.340; 09 (B) does not include retirement benefits, severance pay or other 10 separation bonuses, welfare benefits, per diem, expense allowances, workers' 11 compensation payments, payments for leave not used whether those leave 12 payments are scheduled payments, lump-sum payments, donations, or cash-ins, 13 any remuneration contributed by the employer for or on account of the 14 employee under this plan or under any other qualified or nonqualified 15 employee benefit plan, any remuneration not specifically included above 16 which would have been excluded under 26 U.S.C. 3121(a) (Internal Revenue 17 Code) if the employer had remained in the Federal Social Security System, or 18 any remuneration paid by the employer in excess of the Social Security 19 Taxable Wage Base for the calendar year; 20 (C) notwithstanding (B) of this paragraph, includes any amount 21 that is contributed by the employer under a salary reduction agreement and that 22 is not includible in the gross income of the employee under 26 U.S.C. 125, 23 132(f)(4), 402(e)(3), 402(h)(1)(B) or 403(b) (Internal Revenue Code); the 24 annual compensation limitation for the member, which is so taken into account 25 for those purposes, may not exceed $200,000, as adjusted for the cost of living 26 in accordance with 26 U.S.C. 401(a)(17)(B) (Internal Revenue Code), with the 27 limitation for a fiscal year being the limitation in effect for the calendar year 28 within which the fiscal year begins; 29 (8) "dependent child" has the meaning given in AS 14.25.220; 30 (9) "distribution commencement date" has the meaning given in 31 AS 14.25.440(a);

01 (10) "employer" means a public school district, the Board of Regents 02 of the University of Alaska, the Department of Education and Early Development, or 03 the regional resource centers; 04 (11) "fund" means the assets of the plan; 05 (12) "individual account" means the total maintained by the plan in an 06 investment account within the trust fund, established for each member for the purposes 07 of allocation of the member's contributions, employer contributions on behalf of the 08 member, and earnings credited to each of those contributions, investment gains and 09 losses, and expenses, as well as reporting of the member's benefit under the plan; 10 (13) "Internal Revenue Code" has the meaning given in AS 14.25.220; 11 (14) "investment funds" means those separate funds that are provided 12 within and that make up the trust fund and that are established for the purpose of 13 directing investment through the exercise of the sole control of a member, beneficiary, 14 or alternate payee under the terms of the plan and trust agreement; 15 (15) "limitation year" means the year for which contributions are made 16 to a member's individual account as reported to the Internal Revenue Service under the 17 limits described in 26 U.S.C. 415(c); 18 (16) "member" means an employee of an employer or a former 19 employee of an employer who retains a right to benefits under the plan; 20 (17) "membership service" means full-time or part-time employment 21 with an employer in the plan; 22 (18) "normal retirement age" means the age set for Medicare eligibility 23 at the time the member retires; 24 (19) "participant" means the person who has a vested right to an 25 individual account, such as a member, an alternate payee if the account is subject to a 26 qualified domestic relations order, the member's beneficiary if the member is 27 deceased, or an alternate payee's beneficiary if the alternate payee is deceased; 28 (20) "plan" means the retirement benefit plan established under 29 AS 14.25.310 - 14.25.590; 30 (21) "prudent investment standard" means the degree of care, skill, 31 prudence, and diligence under the circumstances then prevailing that a prudent person

01 acting in a like capacity and familiar with such matters would use in the conduct of an 02 enterprise of a like character and with like aims; 03 (22) "qualified domestic relations order" means a divorce or 04 dissolution judgment under AS 25.24, including an order approving a property 05 settlement, that 06 (A) creates or recognizes the existence of an alternate payee's 07 right to, or assigns to an alternate payee the right to, receive all or a portion of 08 the individual account, or the benefits payable with respect to a member; 09 (B) sets out the name and last known mailing address, if any, of 10 the member and of each alternate payee covered by the order; 11 (C) sets out the amount or percentage of the member's benefit, 12 or of any survivor's benefit, to be paid to the alternate payee, or sets out the 13 manner in which that amount or percentage is to be determined; 14 (D) sets out the number of payments or period to which the 15 order applies; 16 (E) sets out the retirement plan to which the order applies; 17 (F) does not require any type or form of benefit or any option 18 not otherwise provided by AS 14.25.310 - 14.25.590; 19 (G) does not require an increase of benefits in excess of the 20 amount provided by AS 14.25.310 - 14.25.590; and 21 (H) does not require the payment, to an alternate payee, of 22 benefits that are required to be paid to another alternate payee under another 23 order previously determined to be a qualified domestic relations order; 24 (23) "retiree" means an eligible person who has elected to receive the 25 medical benefits under AS 14.25.480; 26 (24) "retirement fund" or "fund" means the fund in which the assets of 27 the plan, including income and interest derived from the investment of money, are 28 deposited and held; 29 (25) "school year" has the meaning given in AS 14.25.220; 30 (26) "system" has the meaning given in AS 14.25.220; 31 (27) "teacher" and "member" are used interchangeably under

01 AS 14.25.310 - 14.25.590 and mean a person eligible to participate in the plan and 02 who is covered by the plan, limited to 03 (A) a certificated full-time or part-time elementary or 04 secondary teacher, a certificated school nurse, or a certificated person in a 05 position requiring a teaching certificate as a condition of employment in a 06 public school of the state, the Department of Education and Early 07 Development, or the Department of Labor and Workforce Development; 08 (B) a full-time or part-time teacher of the University of Alaska 09 or a person occupying a full-time administrative position at the University of 10 Alaska that requires academic standing; the approval of the administrator must 11 be obtained before an administrative position qualifies for membership in the 12 plan; however, a teacher or administrative person at the university who is 13 participating in a university retirement program under AS 14.40.661 - 14 14.40.799 is not a member under this plan; 15 (C) a full-time or part-time instructor of the Department of 16 Labor and Workforce Development who has 17 (i) a teaching certificate regardless of whether the 18 position as instructor requires a teaching certificate as a condition of 19 employment; and 20 (ii) earlier credited service in the plan; 21 (28) "year of service" means service during the dates set for the school 22 year; partial-year service credit is given for membership service as follows: 23 (A) during any school year, 24 (i) less than nine days, no credit; 25 (ii) nine days or more but less than 27 days, 0.1 years; 26 (iii) 27 days or more but less than 45 days, 0.2 years; 27 (iv) 45 days or more but less than 63 days, 0.3 years; 28 (v) 63 days or more but less than 81 days, 0.4 years; 29 (vi) 81 days or more but less than 100 days, 0.5 years; 30 (vii) 100 days or more but less than 118 days, 0.6 years; 31 (viii) 118 days or more but less than 136 days, 0.7

01 years; 02 (ix) 136 days or more but less than 154 days, 0.8 years; 03 (x) 154 days or more but less than 172 days, 0.9 years; 04 (xi) 172 days or more, 1.0 years; 05 (B) service performed on a part-time basis of half time or more 06 shall be credited in proportion to the amount of credit that would have been 07 received for service performed on a full-time basis. 08 * Sec. 34. AS 14.40.280(c) is amended to read: 09 (c) Except as provided by (b) of this section, the monetary gifts, bequests, or 10 endowments that are made to the University of Alaska shall be managed and invested 11 by the Board of Regents. In carrying out its management and investment 12 responsibilities under this subsection, the Board of Regents has the same power and 13 obligations to carry out duties with respect to the endowments of the University of 14 Alaska as are provided to and required of the Alaska Retirement Management 15 [STATE PENSION INVESTMENT] Board under AS 37.10.210 [AS 14.25.180]. 16 * Sec. 35. AS 14.40.400(b) is amended to read: 17 (b) The Board of Regents is the fiduciary of the fund. The Board of Regents 18 shall account for and invest the fund. In carrying out its investment responsibilities 19 under this subsection, the Board of Regents has the same powers and duties with 20 respect to the fund as are provided to and required of the Alaska Retirement 21 Management [STATE PENSION INVESTMENT] Board under AS 37.10.210 22 [AS 14.25.180]. 23 * Sec. 36. AS 14.40.661 is amended to read: 24 Sec. 14.40.661. Authority of board. (a) The board may establish and 25 maintain [AN OPTIONAL] university retirement programs [PROGRAM] for 26 eligible employees in which retirement and death benefits are provided through the 27 purchase of annuity contracts, either fixed, variable, or a combination of fixed and 28 variable. Participation in a university retirement [THE] program is in place of 29 participation in a state retirement system. The university may establish retirement 30 programs for new employees in a participating position at any time. Retirement 31 programs must be optional.

01 (b) The board shall 02 (1) provide for the administration of the retirement programs 03 [PROGRAM], including procedures for resolving complaints from participating 04 employees; 05 (2) designate the company or companies to which payment of the 06 contributions required under AS 14.40.691 may be made, after considering the 07 (A) nature and extent of the rights and benefits that the 08 contracts will provide to employees who elect to participate and to their 09 beneficiaries; 10 (B) relation of the contractual rights and benefits to the 11 contributions to be made under AS 14.40.661 - 14.40.799; 12 (C) suitability of the contractual rights and benefits to the needs 13 and interests of employees who [ELECTING TO] participate and to the 14 interest of the university in the employment and retention of employees; 15 (D) ability of the designated company or companies to provide 16 rights and benefits under the contracts; and 17 (E) efficacy of the contracts in the recruitment and retention of 18 faculty and administrators; 19 (3) take other actions required to ensure that the retirement programs 20 comply with applicable provisions of 26 U.S.C. 401 - 417 [PROGRAM 21 QUALIFIES AS A QUALIFIED TRUST UNDER 26 U.S.C. 401(a)] (Internal 22 Revenue Code). 23 * Sec. 37. AS 14.40.671(a) is amended to read: 24 (a) An employee in a participating position may elect to participate in a [THE 25 OPTIONAL] university retirement program or to participate in the appropriate state 26 retirement system. Eligibility to participate in a [THE] program begins on an 27 employee's appointment to a participating position. 28 * Sec. 38. AS 14.40.671(b) is amended to read: 29 (b) An election under (a) of this section to participate in a university 30 retirement [THE] program is irrevocable. The election shall be made in writing on a 31 form provided by the board and approved for the state by the commissioner of

01 administration. The form must be filed with the university not [BOARD NO] later 02 than 30 days after the date on which the employee is notified by the university that 03 the employee is [FIRST BECOMES] eligible to participate in the program. A copy of 04 the form shall be delivered to the appropriate state retirement system. The election 05 becomes irrevocable on the date it is received by the board. 06 * Sec. 39. AS 14.40.671(c) is amended to read: 07 (c) Participation in a university retirement [THE ELECTION TO 08 PARTICIPATE IN THE] program constitutes a waiver of all rights and benefits under 09 the state retirement systems earned on or after the effective date of the election while 10 the employee is participating in a university retirement [THE] program. 11 * Sec. 40. AS 14.40.671(d) is amended to read: 12 (d) Except as provided in (e) of this section, if a nonvested member of a state 13 retirement system participates [ELECTS TO PARTICIPATE] in a university 14 retirement [THE] program, the employee may choose to transfer the amount in the 15 employee's contribution account to a university retirement [THE] program. If the 16 employee chooses to transfer the account, the appropriate state retirement system shall 17 pay to the university on behalf of the employee an amount equal to the balance in the 18 account. The payment must be made within 45 days after notice of the employee's 19 decision to transfer the employee's contribution account to a university 20 retirement program [THE ELECTION] is received by the state retirement system. 21 The financial officer of the university shall immediately pay the amount received to 22 the designated company or companies for the benefit of the employee. An employee 23 who transfers assets under this subsection may not reclaim the corresponding service 24 in the state retirement system if the employee is reemployed under the state retirement 25 system. 26 * Sec. 41. AS 14.40.671(e) is amended to read: 27 (e) An employee whose rights to transfer assets out of a state retirement 28 system are subject to a qualified domestic relations order is entitled to transfer assets 29 from the state retirement system to a university retirement [THE] program only if 30 the requirements for receiving a refund under AS 14.25.150(b) or AS 39.35.200(c), as 31 appropriate, are met.

01 * Sec. 42. AS 14.40.671(e) is amended to read: 02 (e) An employee whose rights to transfer assets out of a state retirement 03 system are subject to a qualified domestic relations order is entitled to transfer assets 04 from the state retirement system to a university retirement program only if the 05 requirements for receiving a refund under AS 14.25.150(b), 14.25.360, [OR] 06 AS 39.35.200(c), or 39.35.760, as appropriate, are met. 07 * Sec. 43. AS 14.40.671(f) is amended to read: 08 (f) If a vested member of a state retirement system elects to participate in a 09 university retirement [THE] program, the employee ceases to be an active member 10 of the state retirement system on the effective date of the participation in a university 11 retirement [THE] program. The employee retains all benefits accrued in the state 12 retirement system. 13 * Sec. 44. AS 14.40.671(g) is amended to read: 14 (g) An employee who does not [ELECT TO] participate in a university 15 retirement [THE] program under this section becomes or remains a member of the 16 appropriate state retirement system. 17 * Sec. 45. AS 14.40.671 is amended by adding a new subsection to read: 18 (h) Notwithstanding (b) of this section, the university may offer an employee 19 who made an election not to participate in an optional university retirement program at 20 the time the employee was eligible to participate in the program an option to enroll in 21 a different university retirement program. 22 * Sec. 46. AS 14.40.681 is amended to read: 23 Sec. 14.40.681. Retirement system membership. An [ELIGIBLE] employee 24 participating [ELECTING TO PARTICIPATE] in a university retirement [THE] 25 program may not participate in a state retirement system during the time the employee 26 is employed in a participating position. If the employee is later employed in a position 27 covered by a state retirement system that is not a participating position, the employee 28 may not continue to participate in a university retirement [THE] program and shall 29 begin to participate in the state retirement system. 30 * Sec. 47. AS 14.40.691(c) is amended to read: 31 (c) The board may specify that contributions required by this section are made

01 by a reduction in salary under 26 U.S.C. 403(b) or 26 U.S.C. 414(h)(2) (Internal 02 Revenue Code). 03 * Sec. 48. AS 14.40.701 is amended to read: 04 Sec. 14.40.701. Benefits. Payment of benefits to participants of the program 05 is the responsibility of the company or companies designated by the board and is not 06 the responsibility of the board, the university, or the state. The benefits are payable to 07 participants or their beneficiaries in accordance with the terms of the applicable 08 retirement plan document [ANNUITY CONTRACT OR CONTRACTS. 09 HOWEVER, RETIREMENT BENEFITS MUST BE PAID IN THE FORM OF A 10 LIFETIME INCOME. EXCEPT FOR DEATH BENEFITS, A SINGLE-SUM CASH 11 PAYMENT IS NOT PERMITTED UNDER THIS SECTION]. 12 * Sec. 49. AS 14.40.799(3) is amended to read: 13 (3) "contribution account" means the member contribution account 14 under AS 14.25.009 - 14.25.220 [AS 14.25] or the employee contribution account 15 under AS 39.35.095 - 39.35.680 [AS 39.35], whichever is appropriate; 16 * Sec. 50. AS 14.40.799(3) is amended to read: 17 (3) "contribution account" means the member contribution account 18 under AS 14.25.009 - 14.25.220, the individual account under AS 14.25.310 - 19 14.25.590, [OR] the employee contribution account under AS 39.35.095 - 39.35.680, 20 or the individual account under AS 39.35.700 - 39.35.990, whichever is appropriate; 21 * Sec. 51. AS 14.40.799(5) is amended to read: 22 (5) "participating position" means a position that is a permanent 23 position that is at least a .5 full-time appointment and is included in the applicable 24 retirement plan document [AS 25 (A) A FACULTY APPOINTMENT; OR 26 (B) AN ADMINISTRATOR AND THE POSITION HAS 27 BEEN DESIGNATED BY THE BOARD FOR INCLUSION IN THE 28 PROGRAM]; 29 * Sec. 52. AS 14.40.799(6) is amended to read: 30 (6) "program" means a [THE OPTIONAL] university retirement 31 program;

01 * Sec. 53. AS 14.40.799 is amended by adding a new paragraph to read: 02 (8) "university" means the University of Alaska. 03 * Sec. 54. AS 22.25.048(c) is amended to read: 04 (c) The Alaska Retirement Management [STATE PENSION 05 INVESTMENT] Board is the fiduciary of the fund and has the same powers and 06 duties under this section in regard to the judicial retirement trust fund as are provided 07 in AS 37.10.210 [AS 14.25.180]. 08 * Sec. 55. AS 22.25.900(1) is amended to read: 09 (1) "actuarial equivalent" means the adjustment necessary to obtain 10 equality in value of the aggregate expected payments under two different forms of 11 pension payments, considering expected mortality and interest earnings on the basis of 12 assumptions, factors, and methods specified in regulations issued under the system 13 that are formally adopted [UNDER AS 22.25.027] by the Alaska Retirement 14 Management Board [COMMISSIONER OF ADMINISTRATION] that clearly 15 preclude employer discretion in the determination of the amount of any justice's, 16 judge's, or member's benefit; 17 * Sec. 56. AS 26.05.226(a) is amended to read: 18 (a) The Department of Military and Veterans' Affairs shall contribute to the 19 Alaska National Guard and Alaska Naval Militia retirement system the amounts 20 determined by the Alaska Retirement Management Board [COMMISSIONER OF 21 ADMINISTRATION] as necessary to 22 (1) fund the system based on the actuarial requirements of the system 23 as established by the Alaska Retirement Management Board [COMMISSIONER 24 OF ADMINISTRATION]; and 25 (2) administer the system. 26 * Sec. 57. AS 26.05.228(c) is amended to read: 27 (c) The Alaska Retirement Management [STATE PENSION 28 INVESTMENT] Board is the fiduciary of the fund and has the same powers and 29 duties under this section in regard to the fund as are provided under AS 37.10.220 30 [AS 14.25.180]. 31 * Sec. 58. AS 36.30.015(f) is amended to read:

01 (f) The board of directors of the Alaska Housing Finance Corporation, 02 notwithstanding AS 18.56.088, and the board of directors of the Knik Arm Bridge and 03 Toll Authority under AS 19.75.111, shall adopt regulations under AS 44.62 04 (Administrative Procedure Act) and the board of trustees of the Alaska Retirement 05 Management [STATE PENSION INVESTMENT] Board shall adopt regulations 06 under AS 37.10.240 to govern the procurement of supplies, services, professional 07 services, and construction for the respective public corporation and board. The 08 regulations must reflect competitive bidding principles and provide vendors 09 reasonable and equitable opportunities to participate in the procurement process and 10 must include procurement methods to meet emergency and extraordinary 11 circumstances. Notwithstanding the other provisions of this subsection, the Alaska 12 Housing Finance Corporation, the Knik Arm Bridge and Toll Authority, and the 13 Alaska Retirement Management [STATE PENSION INVESTMENT] Board shall 14 comply with AS 36.30.170(b). 15 * Sec. 59. AS 36.30.990(1) is amended to read: 16 (1) "agency" 17 (A) means a department, institution, board, commission, 18 division, authority, public corporation, the Alaska Pioneers' Home, the Alaska 19 Veterans' Home, or other administrative unit of the executive branch of state 20 government; 21 (B) does not include 22 (i) the University of Alaska; 23 (ii) the Alaska Railroad Corporation; 24 (iii) the Alaska Housing Finance Corporation; 25 (iv) a regional Native housing authority created under 26 AS 18.55.996 or a regional electrical authority created under 27 AS 18.57.020; 28 (v) the Department of Transportation and Public 29 Facilities, in regard to the repair, maintenance, and reconstruction of 30 vessels, docking facilities, and passenger and vehicle transfer facilities 31 of the Alaska marine highway system;

01 (vi) the Alaska Aerospace Development Corporation; 02 (vii) the Alaska Retirement Management [STATE 03 PENSION INVESTMENT] Board; 04 (viii) the Alaska Seafood Marketing Institute; 05 * Sec. 60. AS 37.10.071(d) is amended to read: 06 (d) In exercising investment, custodial, or depository powers or duties under 07 this section, the fiduciary or the fiduciary's designee is liable for a breach of a duty 08 that is assigned or delegated under this section, or under [AS 14.25.180,] 09 AS 14.40.255, 14.40.280(c), 14.40.400(b), AS 37.10.070, AS 37.14.110(c), 37.14.160, 10 or 37.14.170 [, OR AS 39.35.080]. However, the fiduciary or the designee is not 11 liable for a breach of a duty that has been delegated to another person if the delegation 12 is prudent under the applicable standard of prudence set out in statute or if the duty is 13 assigned by law to another person, except to the extent that the fiduciary or designee 14 (1) knowingly participates in, or knowingly undertakes to conceal, an 15 act or omission of another person knowing that the act or omission is a breach of that 16 person's duties under this chapter; 17 (2) by failure to comply with this section in the administration of 18 specific responsibilities, enables another person to commit a breach of duty; or 19 (3) has knowledge of a breach of duty by another person, unless the 20 fiduciary or designee makes reasonable efforts under the circumstances to remedy the 21 breach. 22 * Sec. 61. AS 37.10.071(f) is amended to read: 23 (f) In this section, "fiduciary of a state fund" or "fiduciary" means 24 (1) the commissioner of revenue for investments under AS 37.10.070; 25 or 26 (2) with respect to the Alaska Retirement Management [STATE 27 PENSION INVESTMENT] Board, for investments of the collective funds that it 28 manages and administers [UNDER OR SUBJECT TO AS 14.25.180], 29 (A) each trustee who serves on the board of trustees; and 30 (B) any other person who exercises control or authority with 31 respect to management or disposition of assets for which the board is

01 responsible or who gives investment advice to the board; or 02 (3) the person or body provided by law to manage the investments for 03 investments not subject to [AS 14.25.180 OR] AS 37.10.070. 04 * Sec. 62. AS 37.10.210 is repealed and reenacted to read: 05 Sec. 37.10.210. Alaska Retirement Management Board. (a) The Alaska 06 Retirement Management Board is established in the Department of Revenue. The 07 board's primary mission is to serve as the trustee of the assets of the state's retirement 08 systems, the State of Alaska Supplemental Annuity Plan, and the deferred 09 compensation program for state employees. Consistent with standards of prudence, 10 the board has the fiduciary obligation to manage and invest these assets in a manner 11 that is sufficient to meet the liabilities and pension obligations of the systems, plan, 12 and program. The board may, with the approval of the commissioner of revenue and 13 upon agreement with the responsible fiduciary, manage and invest other state funds so 14 long as the activity does not interfere with the board's primary mission. In making 15 investments, the board shall exercise the powers and duties of a fiduciary of a state 16 fund under AS 37.10.071. 17 (b) The Alaska Retirement Management Board consists of nine trustees, as 18 follows: 19 (1) two members, consisting of the commissioner of administration 20 and the commissioner of revenue; 21 (2) seven trustees appointed by the governor who meet the eligibility 22 requirements for an Alaska permanent fund dividend and who are professionally 23 credentialed or have recognized competence in investment management, finance, 24 banking, economics, accounting, pension administration, or actuarial analysis as 25 follows: 26 (A) two trustees who are members of the general public; the 27 trustees appointed under this subparagraph may not hold another state office, 28 position, or employment and may not be members or beneficiaries of a 29 retirement system managed by the board; 30 (B) one trustee who is employed as a finance officer for a 31 political subdivision participating in either the public employees' retirement

01 system or the teachers' retirement system; 02 (C) two trustees who are members of the public employees' 03 retirement system, selected from a list of four nominees submitted from among 04 the public employees' retirement system bargaining units; 05 (D) two trustees who are members of the teachers' retirement 06 system selected from a list of four nominees submitted from among the 07 teachers' retirement system bargaining units; 08 (E) the lists of the nominees shall be submitted to the governor 09 under (C) and (D) of this paragraph within the time period specified in 10 regulations adopted under AS 37.10.240(a). 11 (c) The trustees, other than the two commissioners, shall serve for staggered 12 terms of four years and may be reappointed to the board. 13 (d) The governor may, by written notice to the trustee, remove an appointed 14 trustee for cause. After an appointed trustee receives written notice of removal, the 15 trustee may not participate in board business and may not be counted for purposes of 16 establishing a quorum. 17 (e) A vacancy on the board of trustees shall be promptly filled. A person 18 filling a vacancy holds office for the balance of the unexpired term of the person's 19 predecessor. A vacancy on the board does not impair the authority of a quorum of the 20 board to exercise all the powers and perform all the duties of the board. 21 (f) Five trustees constitute a quorum for the transaction of business and the 22 exercise of the powers and duties of the board. 23 (g) A trustee may not designate another person to serve on the board in the 24 absence of the trustee. 25 (h) The board shall provide annual training to its members on the duties and 26 powers of a fiduciary of a state fund and other training as necessary to keep the 27 members of the board educated about pension management and investment. 28 (i) The board shall elect a trustee to serve as chair and a trustee to serve as 29 vice-chair for one-year terms. A trustee may be reelected to serve additional terms as 30 chair or vice-chair. 31 * Sec. 63. AS 37.10 is amended by adding a new section to read:

01 Sec. 37.10.215. Attorney general. The attorney general is the legal counsel 02 for the board and shall advise the board and represent it in a legal proceeding. 03 * Sec. 64. AS 37.10.220 is repealed and reenacted to read: 04 Sec. 37.10.220. Powers and duties of the board. (a) The board shall 05 (1) hold regular and special meetings at the call of the chair or of at 06 least five members; meetings are open to the public, and the board shall keep a full 07 record of all its proceedings; 08 (2) after reviewing recommendations from the Department of 09 Revenue, adopt investment policies for each of the funds entrusted to the board; 10 (3) determine the appropriate investment objectives for the defined 11 benefit plans established under the teachers' retirement system under AS 14.25 and the 12 public employees' retirement system under AS 39.35; 13 (4) assist in prescribing the policies for the proper operation of the 14 systems and take other actions necessary to carry out the intent and purpose of the 15 systems in accordance with AS 37.10.210 - 37.10.390; 16 (5) provide a range of investment options and establish the rules by 17 which participants can direct their investments among those options with respect to 18 accounts established under 19 (A) AS 39.30.150 - 39.30.180 (State of Alaska Supplementary 20 Annuity Plan); and 21 (B) AS 39.45.010 - 39.45.060 (public employees' deferred 22 compensation program); 23 (6) establish the rate of interest that shall be annually credited to each 24 member's individual contribution account in accordance with AS 14.25.145 and 25 AS 39.35.100; the rate of interest shall be adopted on the basis of the probable 26 effective rate of interest on a long-term basis, and the rate may be changed from time 27 to time; 28 (7) adopt a contribution surcharge as necessary under AS 39.35.160(c); 29 (8) coordinate with the retirement system administrator to have an 30 annual actuarial valuation of each retirement system prepared to determine system 31 assets, accrued liabilities, and funding ratios and to certify to the appropriate

01 budgetary authority of each employer in the system 02 (A) an appropriate contribution rate for normal costs; and 03 (B) an appropriate contribution rate for liquidating any past 04 service liability; 05 (9) review actuarial assumptions prepared and certified by a member 06 of the American Academy of Actuaries and conduct experience analyses of the 07 retirement systems not less than once every four years, except for health cost 08 assumptions, which shall be reviewed annually; the results of all actuarial assumptions 09 prepared under this paragraph shall be reviewed and certified by a second member of 10 the American Academy of Actuaries before presentation to the board; 11 (10) contract for an independent audit of the state's actuary not less 12 than once every four years; 13 (11) contract for an independent audit of the state's performance 14 consultant not less than once every four years; 15 (12) obtain an external performance review to evaluate the investment 16 policies of each fund entrusted to the board and report the results of the review to the 17 appropriate fund fiduciary; 18 (13) by the first day of each regular legislative session, report to the 19 governor, the legislature, and the individual employers participating in the state's 20 retirement systems on the financial condition of the systems in regard to 21 (A) the valuation of trust fund assets and liabilities; 22 (B) current investment policies adopted by the board; 23 (C) a summary of assets held in trust listed by the categories of 24 investment; 25 (D) the income and expenditures for the previous fiscal year; 26 (E) the return projections for the next calendar year; 27 (F) one-year, three-year, five-year, and 10-year investment 28 performance for each of the funds entrusted to the board; and 29 (G) other statistical data necessary for a proper understanding 30 of the financial status of the systems; 31 (14) submit quarterly updates of the investment performance reports to

01 the Legislative Budget and Audit Committee; and 02 (15) develop an annual operating budget. 03 (b) The board may 04 (1) employ outside investment advisors to review investment policies; 05 (2) enter into an agreement with the fiduciary of another state fund in 06 order to assume the management and investment of those assets; 07 (3) contract for other services necessary to execute the board's powers 08 and duties; 09 (4) enter into confidentiality agreements that would exempt records 10 from AS 40.25.110 and 40.25.120 if the records contain information that could affect 11 the value of investment by the board or that could impair the ability of the board to 12 acquire, maintain, or dispose of investments. 13 (c) Expenses for the board and the operations of the board shall be paid from 14 the retirement fund. 15 * Sec. 65. AS 37.10.220(a) is amended to read: 16 (a) The board shall 17 (1) hold regular and special meetings at the call of the chair or of at 18 least five members; meetings are open to the public, and the board shall keep a full 19 record of all its proceedings; 20 (2) after reviewing recommendations from the Department of 21 Revenue, adopt investment policies for each of the funds entrusted to the board; 22 (3) determine the appropriate investment objectives for the defined 23 benefit plans established under the teachers' retirement system under AS 14.25 and the 24 public employees' retirement system under AS 39.35; 25 (4) assist in prescribing the policies for the proper operation of the 26 systems and take other actions necessary to carry out the intent and purpose of the 27 systems in accordance with AS 37.10.210 - 37.10.390; 28 (5) provide a range of investment options and establish the rules by 29 which participants can direct their investments among those options with respect to 30 accounts established under 31 (A) AS 14.25.340 - 14.25.350 (teachers' retirement system

01 defined contribution individual accounts); 02 (B) AS 39.30.150 - 39.30.180 (State of Alaska Supplementary 03 Annuity Plan); 04 (C) AS 39.35.730 - 39.35.750 (public employees' retirement 05 system defined contribution individual accounts); and 06 (D) [(B)] AS 39.45.010 - 39.45.060 (public employees' 07 deferred compensation program); 08 (6) establish the rate of interest that shall be annually credited to each 09 member's individual contribution account in accordance with AS 14.25.145 and 10 AS 39.35.100 and the rate of interest that shall be annually credited to each 11 member's account in the health reimbursement arrangement plan under 12 AS 39.30.300 - 39.30.495; the rate of interest shall be adopted on the basis of the 13 probable effective rate of interest on a long-term basis, and the rate may be changed 14 from time to time; 15 (7) adopt a contribution surcharge as necessary under AS 39.35.160(c); 16 (8) coordinate with the retirement system administrator to have an 17 annual actuarial valuation of each retirement system prepared to determine system 18 assets, accrued liabilities, and funding ratios and to certify to the appropriate 19 budgetary authority of each employer in the system 20 (A) an appropriate contribution rate for normal costs; and 21 (B) an appropriate contribution rate for liquidating any past 22 service liability; 23 (9) review actuarial assumptions prepared and certified by a member 24 of the American Academy of Actuaries and conduct experience analyses of the 25 retirement systems not less than once every four years, except for health cost 26 assumptions, which shall be reviewed annually; the results of all actuarial assumptions 27 prepared under this paragraph shall be reviewed and certified by a second member of 28 the American Academy of Actuaries before presentation to the board; 29 (10) contract for an independent audit of the state's actuary not less 30 than once every four years; 31 (11) contract for an independent audit of the state's performance

01 consultant not less than once every four years; 02 (12) obtain an external performance review to evaluate the investment 03 policies of each fund entrusted to the board and report the results of the review to the 04 appropriate fund fiduciary; 05 (13) by the first day of each regular legislative session, report to the 06 governor, the legislature, and the individual employers participating in the state's 07 retirement systems on the financial condition of the systems in regard to 08 (A) the valuation of trust fund assets and liabilities; 09 (B) current investment policies adopted by the board; 10 (C) a summary of assets held in trust listed by the categories of 11 investment; 12 (D) the income and expenditures for the previous fiscal year; 13 (E) the return projections for the next calendar year; 14 (F) one-year, three-year, five-year, and 10-year investment 15 performance for each of the funds entrusted to the board; and 16 (G) other statistical data necessary for a proper understanding 17 of the financial status of the systems; 18 (14) submit quarterly updates of the investment performance reports to 19 the Legislative Budget and Audit Committee; and 20 (15) develop an annual operating budget. 21 * Sec. 66. AS 37.10.250 is amended to read: 22 Sec. 37.10.250. Compensation of trustees. Trustees, other than trustees who 23 are employees of the state, [OR] a political subdivision of the state, or a school 24 district or regional educational attendance area in the state, receive an honorarium 25 of $400 [$150] for each day spent at a meeting of the board or at a meeting of a 26 subcommittee of the board or at a public meeting as a representative of the board, 27 including a day in which a trustee travels to or from a meeting. Trustees who are 28 state employees are entitled to administrative leave for service as a trustee. Trustees 29 who are employees of a political subdivision of the state or a school district or 30 regional educational attendance area in the state are entitled to leave benefits 31 provided by their employers comparable to those provided to state employees for

01 service as a trustee. Trustees are entitled to per diem and travel expenses authorized 02 for boards and commissions under AS 39.20.180. 03 * Sec. 67. AS 37.10.270(a) is amended to read: 04 (a) The board may [SHALL] appoint an investment advisory council 05 composed of at least three and not more than five members. Members of the council 06 shall possess experience and expertise in financial investments and management of 07 investment portfolios for public, corporate, or union pension benefit funds, 08 foundations, or endowments. 09 * Sec. 68. AS 37.10.390 is amended to read: 10 Sec. 37.10.390. Definitions. In AS 37.10.210 - 37.10.390, unless the context 11 otherwise requires, 12 (1) "board" means the board of trustees of the Alaska Retirement 13 Management [STATE PENSION INVESTMENT] Board; 14 (2) "fund" means the fund or funds composed of the assets of each 15 of the retirement systems administered and managed by the board; 16 (3) "recognized competence" means a minimum of 10 years' 17 professional experience working or teaching in the field of investment 18 management, finance, banking, economics, accounting, pension administration, 19 or actuarial analysis; 20 (4) "retirement systems" or "systems" means the teachers' retirement 21 system, the judicial retirement system, the Alaska National Guard and Alaska Naval 22 Militia retirement system, [AND] the public employees' retirement system, the State 23 of Alaska teachers' and public employees' retiree health reimbursement 24 arrangement plan, and the elected public officers' retirement system under 25 former AS 39.37. 26 * Sec. 69. AS 37.14.160 is amended to read: 27 Sec. 37.14.160. Duties of the commissioner of revenue. The commissioner 28 of revenue is the treasurer of the trust fund created in AS 37.14.110 and shall 29 (1) in carrying out investment duties under this section, exercise the 30 same powers and duties established for the Alaska Retirement Management [STATE 31 PENSION INVESTMENT] Board in AS 37.10.210 [AS 14.25.180(c)];

01 (2) deposit the principal and income from investments in separate 02 principal and income accounts for the fund; 03 (3) invest and maintain accounting records that distinguish between the 04 principal and income of the fund; 05 (4) provide reports to the board established under AS 37.14.120 on the 06 condition and investment performance of the fund. 07 * Sec. 70. AS 37.14.210(4) is amended to read: 08 (4) invest and reinvest the assets of the trust as provided in this section 09 and as provided for the investment of funds under [AS 14.25.180(c) AND] 10 AS 37.14.170; 11 * Sec. 71. AS 37.14.520(4) is amended to read: 12 (4) invest and reinvest the assets of the fund as provided in this section 13 and as provided for the investment of funds under [AS 14.25.180(c) AND] 14 AS 37.14.170; 15 * Sec. 72. AS 37.14.610 is amended to read: 16 Sec. 37.14.610. Duties of the commissioner. The commissioner of revenue 17 has the power and duty to 18 (1) act as official custodian of the cash and investments belonging to 19 the Arctic Winter Games Team Alaska trust by securing adequate and safe custodial 20 facilities; 21 (2) exercise the same powers and duties as those established for the 22 Alaska Retirement Management [STATE PENSION INVESTMENT] Board in 23 AS 37.10.210 [AS 14.25.180(b) AND (c)]; 24 (3) invest the assets of the trust in a manner likely to yield at least five 25 percent real rate of return over time; 26 (4) maintain accounting records of the trust in accordance with 27 investment accounting principles; 28 (5) enter into and enforce contracts or agreements considered 29 necessary for the investment purposes of the trust; 30 (6) report annually to the board of directors of the Arctic Winter 31 Games Team Alaska the condition and performance of the trust;

01 (7) monitor use of trust money by the Arctic Winter Games Team 02 Alaska; and 03 (8) do all acts that the commissioner of revenue considers necessary or 04 proper in administering the assets of the trust. 05 * Sec. 73. AS 39.30.090(a) is amended to read: 06 (a) The Department of Administration may obtain a policy or policies of group 07 insurance covering state employees, persons entitled to coverage under AS 14.25.168, 08 14.25.480, AS 22.25.090, AS 39.35.535, 39.35.880, or former AS 39.37.145, 09 employees of other participating governmental units, or persons entitled to coverage 10 under AS 23.15.136, subject to the following conditions: 11 (1) A group insurance policy shall provide one or more of the 12 following benefits: life insurance, accidental death and dismemberment insurance, 13 weekly indemnity insurance, hospital expense insurance, surgical expense insurance, 14 dental expense insurance, audiovisual insurance, or other medical care insurance. 15 (2) Each eligible employee of the state, the spouse and the unmarried 16 children chiefly dependent on the eligible employee for support, and each eligible 17 employee of another participating governmental unit shall be covered by the group 18 policy, unless exempt under regulations adopted by the commissioner of 19 administration. 20 (3) A governmental unit may participate under a group policy if 21 (A) its governing body adopts a resolution authorizing 22 participation, and payment of required premiums; 23 (B) a certified copy of the resolution is filed with the 24 Department of Administration; and 25 (C) the commissioner of administration approves the 26 participation in writing. 27 (4) In procuring a policy of group health or group life insurance as 28 provided under this section or excess loss insurance as provided in AS 39.30.091, the 29 Department of Administration shall comply with the dual choice requirements of 30 AS 21.86.310, and shall obtain the insurance policy from an insurer authorized to 31 transact business in the state under AS 21.09, a hospital or medical service corporation

01 authorized to transact business in this state under AS 21.87, or a health maintenance 02 organization authorized to operate in this state under AS 21.86. An excess loss 03 insurance policy may be obtained from a life or health insurer authorized to transact 04 business in this state under AS 21.09 or from a hospital or medical service corporation 05 authorized to transact business in this state under AS 21.87. 06 (5) The Department of Administration shall make available bid 07 specifications for desired insurance benefits or for administration of benefit claims and 08 payments to (A) all insurance carriers authorized to transact business in this state 09 under AS 21.09 and all hospital or medical service corporations authorized to transact 10 business under AS 21.87 who are qualified to provide the desired benefits; and (B) to 11 insurance carriers authorized to transact business in this state under AS 21.09, hospital 12 or medical service corporations authorized to transact business under AS 21.87, and 13 third-party administrators licensed to transact business in this state and qualified to 14 provide administrative services. The specifications shall be made available at least 15 once every five years. The lowest responsible bid submitted by an insurance carrier, 16 hospital or medical service corporation, or third-party administrator with adequate 17 servicing facilities shall govern selection of a carrier, hospital or medical service 18 corporation, or third-party administrator under this section or the selection of an 19 insurance carrier or a hospital or medical service corporation to provide excess loss 20 insurance as provided in AS 39.30.091. 21 (6) If the aggregate of dividends payable under the group insurance 22 policy exceeds the governmental unit's share of the premium, the excess shall be 23 applied by the governmental unit for the sole benefit of the employees. 24 (7) A person receiving benefits under AS 14.25.110, AS 22.25, 25 AS 39.35, or former AS 39.37 may continue the life insurance coverage that was in 26 effect under this section at the time of termination of employment with the state or 27 participating governmental unit. 28 (8) A person electing to have insurance under (7) of this subsection 29 shall pay the cost of this insurance. 30 (9) For each permanent part-time employee electing coverage under 31 this section, the state shall contribute one-half the state contribution rate for permanent

01 full-time state employees, and the permanent part-time employee shall contribute the 02 other one-half. 03 (10) A person receiving benefits under AS 14.25, AS 22.25, AS 39.35, 04 or former AS 39.37 may obtain auditory, visual, and dental insurance for that person 05 and eligible dependents under this section. The level of coverage for persons over 65 06 shall be the same as that available before reaching age 65 except that the benefits 07 payable shall be supplemental to any benefits provided under the federal old age, 08 survivors, and disability insurance program. A person electing to have insurance 09 under this paragraph shall pay the cost of the insurance. The commissioner of 10 administration shall adopt regulations implementing this paragraph. 11 (11) A person receiving benefits under AS 14.25, AS 22.25, AS 39.35, 12 or former AS 39.37 may obtain long-term care insurance for that person and eligible 13 dependents under this section. A person who elects insurance under this paragraph 14 shall pay the cost of the insurance premium. The commissioner of administration 15 shall adopt regulations to implement this paragraph. 16 (12) Each licensee holding a current operating agreement for a vending 17 facility under AS 23.15.010 - 23.15.210 shall be covered by the group policy that 18 applies to governmental units other than the state. 19 * Sec. 74. AS 39.30.090 is amended by adding a new subsection to read: 20 (c) The Department of Administration shall implement by regulation cost- 21 saving measures appropriate applicable to group insurance obtained under (a) of this 22 section. This includes using manufacturer's rebates, copay levels, and multi-tiered 23 copayment structures; mandating the use of generic drugs; determining the type of 24 drug classes in a formulary; dispensing fees; mandating or providing incentives for 25 mail order pharmaceuticals; using a reduction in the average wholesale price; 26 providing case management services for certain users of pharmaceuticals; capping the 27 number of prescriptions filled each month; and restricting the number of refills that 28 users may have at one time. 29 * Sec. 75. AS 39.30.095(d) is amended to read: 30 (d) If the commissioner of administration determines that there is more money 31 in the fund than the amount needed to pay premiums, benefits, and administrative

01 costs for the current fiscal year, the surplus, or so much of it as the commissioner of 02 administration considers advisable, may be invested by the commissioner of revenue 03 in the same manner as retirement funds are invested under AS 37.10.210 and 04 37.10.220 [AS 14.25.180]. 05 * Sec. 76. AS 39.30.150(b) is amended to read: 06 (b) Employees of the division of marine transportation included in 07 AS 39.35.095 - 39.35.680 [THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM] 08 through the process of collective bargaining under AS 39.35.680(21)(D) may, under 09 the terms of a collective bargaining agreement, utilize contributions made under (a) of 10 this section on their behalf to offset the costs of inclusion in the public employees' 11 retirement system; however, 12 (1) the state is placed under no obligation to continue making 13 contributions under this section if the state resumes participation in the federal social 14 security system; 15 (2) the bargaining agreement must provide a mechanism for satisfying 16 any residual liabilities that might exist if the state resumes participation in the federal 17 social security system; and 18 (3) funds contributed under (a) of this section on behalf of employees 19 who are not covered by maritime union contracts may not be obligated or expended to 20 pay any costs associated with the inclusion of marine transportation employees in 21 AS 39.35.095 - 39.35.680 [THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM]. 22 * Sec. 77. AS 39.30 is amended by adding a new section to read: 23 Sec. 39.30.151. Administrator. The commissioner of administration or the 24 commissioner's designee is the administrator of the system. 25 * Sec. 78. AS 39.30 is amended by adding a new section to read: 26 Sec. 39.30.154. Powers and duties of the administrator. The administrator 27 has the same powers and duties with regard to the plan as those set out in 28 AS 14.25.004. 29 * Sec. 79. AS 39.30.155 is repealed and reenacted to read: 30 Sec. 39.30.155. Management and investment of fund. The Alaska 31 Retirement Management Board is the fiduciary of the fund and has the same powers

01 and duties under this section in regard to the fund as are provided under AS 37.10.210. 02 * Sec. 80. AS 39.30.160(a) is amended to read: 03 (a) The Department of Administration shall, in accordance with policies 04 prescribed by regulations of the Alaska Retirement Management [PUBLIC 05 EMPLOYEES RETIREMENT] Board, provide to employees for whom special 06 individual employee benefit accounts are established under AS 39.30.150(c) 07 [AS 39.30.150] the following benefit options: 08 (1) supplemental health benefits; [,] 09 (2) supplemental death benefits; [,] 10 (3) supplemental disability benefits; [,] and 11 (4) supplemental dependent care benefits. 12 * Sec. 81. AS 39.30.160(b) is amended to read: 13 (b) An employee may select the types and amounts of supplemental benefits to 14 be purchased with the money deposited in the employee's special individual employee 15 benefit accounts under AS 39.30.150. The selection for employees described in 16 AS 39.30.150(a) must be from the benefit options listed in (a) of this section. 17 * Sec. 82. AS 39.30.160(e) is amended to read: 18 (e) Regulations adopted by the board [PUBLIC EMPLOYEES 19 RETIREMENT BOARD] implementing AS 39.30.150 and this section are not subject 20 to AS 44.62 (Administrative Procedure Act). 21 * Sec. 83. AS 39.30.175(a) is amended to read: 22 (a) The board [ALASKA STATE PENSION INVESTMENT BOARD] is the 23 fiduciary of the mandatory receipts, under AS 39.30.150(a), of the employee benefits 24 program established under AS 39.30.150 - 39.30.180 and has the same powers and 25 duties concerning the management and investment in regard to those receipts as are 26 provided under AS 37.10.210 [AS 14.25.180]. 27 * Sec. 84. AS 39.30.180 is amended by adding a new paragraph to read: 28 (3) "board" means the board of trustees of the Alaska Retirement 29 Management Board established under AS 37.10.210. 30 * Sec. 85. AS 39.30 is amended by adding new sections to read: 31 Article 5. State of Alaska Teachers' and Public Employees' Retiree Health

01 Reimbursement Arrangement Plan. 02 Sec. 39.30.300. State of Alaska Teachers' and Public Employees' Retiree 03 Health Reimbursement Arrangement Plan established. The State of Alaska 04 Teachers' and Public Employees' Retiree Health Reimbursement Arrangement Plan is 05 established for teachers who first become members of the defined contribution plan of 06 the teachers' retirement system under AS 14.25.310 - 14.25.590 on or after July 1, 07 2006, and employees of the state, political subdivisions of the state, and public 08 organizations of the state who first become members of the defined contribution plan 09 of the public employees' retirement system under AS 39.35.700 - 39.35.990 on or after 10 July 1, 2006. 11 Sec. 39.30.310. Purpose and effective date. (a) The purpose of the plan is to 12 allow medical care expenses to be reimbursed from individual savings accounts 13 established for eligible persons. 14 (b) The plan becomes effective July 1, 2006, at which time contributions by 15 employers begin. 16 Sec. 39.30.320. Attorney general. The attorney general of the state is the 17 legal counsel for the plan and shall advise the administrator and represent the plan in a 18 legal proceeding. 19 Sec. 39.30.330. Administrator. The commissioner of administration or the 20 commissioner's designee is the administrator of the plan. 21 Sec. 39.30.340. Powers and duties of the administrator. The administrator 22 shall establish a teachers' and public employees' retiree health reimbursement 23 arrangement plan trust fund in which the assets of the plan shall be deposited and held. 24 The administrator has the same powers and duties with regard to the plan and the trust 25 fund as provided in AS 14.25.004. 26 Sec. 39.30.350. Employer contribution fund. The fund established under 27 AS 39.30.340 is an employer contribution fund. The value of the fund reflects 28 employer contributions, expenses, and investment gains and losses. Employee 29 contributions to the fund are not permitted. 30 Sec. 39.30.360. Management and investment of the fund. The Alaska 31 Retirement Management Board is the fiduciary of the fund and has the same powers

01 and duties under this section in regard to the fund as are provided under AS 37.10.220. 02 Sec. 39.30.370. Contributions by employers. For each member of the plan, 03 an employer shall contribute to the teachers' and public employees' retiree health 04 reimbursement arrangement plan trust fund an amount equal to three percent of the 05 employer's average annual employee compensation. The administrator shall maintain 06 a record for each member to account for employer contributions on behalf of that 07 member. The board shall establish by regulation the rate of interest to be applied 08 annually to the amount in a member's individual account. 09 Sec. 39.30.380. Termination of employment. A person who terminates 10 employment before meeting the eligibility requirements of AS 14.25.470 or 11 AS 39.35.870 loses any right to the contributions made on behalf of the person to the 12 teachers' and public employees' retiree health reimbursement arrangement trust fund. 13 If a person returns to employment with a participating employer by December 31 of 14 the year in which the person reaches 65 years of age, the person's account balance 15 shall be restored in the amount recorded on the date of termination from the trust, 16 adjusted for inflation at the rate of the Consumer Price Index for Anchorage, Alaska. 17 The earlier period of employment with a participating employer shall be credited 18 toward eligibility for medical benefits. 19 Sec. 39.30.390. Eligibility and reimbursement. Persons who meet the 20 eligibility requirements of AS 14.25.470 and AS 39.35.870 are eligible for 21 reimbursements from the individual account established for a member under the plan, 22 except members do not have to retire directly from the system. A person who is the 23 dependent child of an eligible member is eligible for reimbursements if the eligible 24 member and surviving spouse have both died so long as the person meets the 25 definition of dependent child. 26 Sec. 39.30.400. Benefits payable from the individual account. (a) The 27 administrator may deduct the cost of monthly premiums from the individual account 28 for retiree major medical insurance on behalf of an eligible person who elected retiree 29 major medical insurance under AS 14.25.480 or AS 39.35.880. 30 (b) Upon application of an eligible person, the administrator shall reimburse to 31 the eligible person the costs for medical care expenses as defined in 26 U.S.C. 213(d).

01 Reimbursement is limited to the medical expenses of 02 (1) an eligible member, the spouse of an eligible member, and the 03 dependent children of an eligible member; or 04 (2) a surviving spouse and the dependent children of an eligible 05 member dependent on the surviving spouse. 06 (c) When the member's individual account balance is exhausted, the insurance 07 premium deductions under (a) of this section and the reimbursement of medical care 08 expenses under (b) of this section end. 09 (d) If all eligible persons die before exhausting the member's individual 10 account, the account balance shall revert to the plan. 11 Sec. 39.30.410. Exemption from taxation and process. (a) Contributions 12 and other amounts held in the plan on behalf of a member or other person who is or 13 may become eligible for benefits under the plan may be used only to reimburse 14 eligible medical expenses, are exempt from Alaska state and municipal taxes and 15 federal taxes to the extent allowed under the Internal Revenue Code, and are not 16 subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or 17 charge of any kind, either voluntary or involuntary, before they are received by the 18 person entitled to the amount under the terms of the plan. Any attempt to anticipate, 19 alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any 20 right to amounts accrued in the plan is void. However, a member's right to receive 21 benefits may be assigned 22 (1) under a qualified domestic relations order; or 23 (2) to a trust or similar legal device that meets the requirements for a 24 Medicaid-qualifying trust under AS 47.07.020(f) and 42 U.S.C. 1396p(d)(4). 25 (b) Notwithstanding AS 09.38.065, contributions and other amounts held in 26 the plan and benefits payable under this plan are exempt from garnishment, execution, 27 or levy. 28 Sec. 39.30.420. Amendment and termination of plan. (a) The state has the 29 right to amend the plan at any time and from time to time, in whole or in part, 30 including the right to make retroactive amendments referred to in 26 U.S.C. 401(b). 31 (b) The plan administrator may not modify or amend the plan retroactively in

01 such a manner as to reduce the benefits of any member accrued to date under the plan 02 by reason of contributions made before the modification or amendment except to the 03 extent that the reduction is permitted by the Internal Revenue Code. 04 (c) The state may, in its discretion, terminate the plan in whole or part at any 05 time without liability for the termination. If the plan is terminated, all investments 06 remain in force until all individual accounts have been completely distributed under 07 the plan, and, after all plan liabilities are satisfied, excess assets revert to the employer. 08 (d) Any contribution made by an employer to the plan because of a mistake of 09 fact must be returned to the employer by the administrator within one year after the 10 contribution or discovery, whichever is later. 11 Sec. 39.30.430. Exclusive benefit. (a) The corpus or income of the assets 12 held in trust as required by the plan may not be diverted or used for other than the 13 exclusive benefit of the participants. 14 (b) The assets of the plan may not be used to pay premiums or contributions of 15 the employer under another plan maintained by the employer. 16 Sec. 39.30.495. Definitions. Unless the context requires otherwise, in 17 AS 39.30.300 - 39.30.495 18 (1) "administrator" means the commissioner of administration or the 19 commissioner's designee; 20 (2) "board" means the Alaska Retirement Management Board 21 established under AS 37.10.210; 22 (3) "compensation" has the meaning given in AS 14.25.590; 23 (4) "eligible person" means a person who meets the eligibility 24 requirements of AS 14.25.470 or AS 39.35.870; 25 (5) "dependent child" has the meaning given in AS 39.35.680; 26 (6) "employer" has the meaning given in AS 14.25.590 for employers 27 of teachers in the defined contribution plan established in AS 14.25.310 - 14.25.590 28 and has the meaning given in AS 39.35.990 for employers of public employees in the 29 defined contribution plan established in AS 39.35.700 - 39.35.990; 30 (7) "fund" means the assets of the teachers' and public employees' 31 retiree health reimbursement arrangement plan trust fund;

01 (8) "individual account" means the record established by the 02 administrator for individual employees under the teachers' and public employees' 03 retiree health reimbursement arrangement plan; 04 (9) "member" means a member of the defined contribution plan of the 05 teachers' retirement system in AS 14.25.310 - 14.25.590 or a member of the public 06 employees' retirement system in AS 39.35.700 - 39.35.990; 07 (10) "plan" means the State of Alaska Teachers' and Public Employees' 08 Retiree Health Reimbursement Arrangement Plan established in AS 39.30.300; 09 (11) "qualified domestic relations order" has the meaning given in 10 AS 14.25.220. 11 * Sec. 86. AS 39.35 is amended by adding new sections to read: 12 Article 1. Administration of the Public Employees' Retirement System of Alaska. 13 Sec. 39.35.001. Purpose. The purpose of this chapter is to encourage 14 qualified personnel to enter and remain in service with participating employers by 15 establishing plans for the payment of retirement, disability, and death benefits to or on 16 behalf of the members. 17 Sec. 39.35.002. Attorney general. The attorney general of the state is the 18 legal counsel for the system and shall advise the administrator and represent the 19 system in a legal proceeding. 20 Sec. 39.35.003. Administrator. (a) The commissioner of administration or 21 the commissioner's designee is the administrator of the system. 22 (b) The commissioner of administration shall adopt regulations to govern the 23 operation of the system. 24 Sec. 39.35.004. Powers and duties of the administrator. (a) The 25 administrator shall 26 (1) establish and maintain an adequate system of accounts; 27 (2) transmit the funds deposited in the system to the retirement fund 28 established and maintained by the Alaska Retirement Management Board; 29 (3) approve or disapprove claims for retirement benefits; 30 (4) make payments for the various purposes specified; 31 (5) submit periodic reports or statements of account that are needed;

01 (6) issue a statement of account to an employee not less than once each 02 year showing the amount of the employee's contributions to the applicable plan in the 03 system; 04 (7) formulate and recommend to the commissioner of administration 05 regulations to govern the operation of the system; 06 (8) as soon as possible after the close of each fiscal year, and not later 07 than six months after the close of each fiscal year, send to the governor and the 08 legislature an annual statement on the operations of each of the plans in the system 09 containing 10 (A) a balance sheet; 11 (B) a statement of income and expenditures for the year; 12 (C) a report on valuation of trust fund assets; 13 (D) a summary of assets held in the trust fund listed by the 14 categories of investment, as provided by the Alaska Retirement Management 15 Board; 16 (E) other statistical financial data that are necessary for proper 17 understanding of the financial condition of the system as a whole and each plan 18 in the system and the result of its operations; 19 (9) engage an independent certified public accountant to conduct an 20 annual audit of each plan's accounts and the annual report of the system's financial 21 condition and activity; 22 (10) report to the Legislative Budget and Audit Committee concerning 23 the condition and administration of each plan and distribute the report to the members 24 of each plan in the system; 25 (11) publish an information handbook for each plan in the system at 26 intervals that the administrator considers appropriate; 27 (12) meet at least annually with the board to review the condition and 28 management of the retirement systems and to review significant changes to policies, 29 regulations or benefits; and 30 (13) do whatever else may be necessary to carry out the purposes of 31 each plan in the system.

01 (b) The administrator is authorized to charge uniform fees to members' 02 accounts to cover the ongoing cost of operating each plan in the system. 03 (c) The administrator is authorized to contract with public and private entities 04 to provide record keeping, benefits payments, and other functions necessary for the 05 administration of each plan in the system. 06 Sec. 39.35.005. Regulations. (a) Regulations adopted by the commissioner 07 of administration under this chapter relate to the internal management of state 08 agencies, and the adoption of these regulations is not subject to AS 44.62 09 (Administrative Procedure Act). 10 (b) Notwithstanding (a) of this section, a regulation adopted under this chapter 11 shall be published in the Alaska Administrative Register and Code for informational 12 purposes. 13 (c) Each regulation adopted under this chapter must conform to the style and 14 format requirements of the drafting manual for administrative regulations that is 15 published under AS 44.62.050. 16 (d) At least 30 days before the adoption, amendment, or repeal of a regulation 17 under this chapter, the commissioner shall provide notice of the action that is being 18 considered. The notice shall be 19 (1) posted in public buildings throughout the state; 20 (2) published in one or more newspapers of general circulation in each 21 judicial district of the state; 22 (3) mailed to each person or group that has filed a request for notice of 23 proposed action with the commissioner; and 24 (4) furnished to each member of the legislature and to the Legislative 25 Affairs Agency. 26 (e) Failure to mail notice to a person as required under (d)(3) of this section 27 does not invalidate an action taken by the commissioner. 28 (f) The commissioner may hold a public hearing on a proposed regulation. 29 (g) A regulation adopted under this chapter takes effect 30 days after adoption 30 by the commissioner. 31 (h) Notwithstanding the other provisions of this section, a regulation may be

01 adopted, amended, or repealed, effective immediately, as an emergency regulation by 02 the commissioner. For an emergency regulation to be effective the commissioner 03 must find that the adoption, amendment, or repeal of the regulation is necessary for the 04 immediate preservation of the orderly operation of the system. The commissioner 05 shall, within 10 days after adoption of an emergency regulation, give notice of the 06 adoption under (d) of this section. 07 (i) In this section, "regulation" has the meaning given in AS 44.62.640(a). 08 Sec. 39.35.006. Appeals. An employer, member, annuitant, or beneficiary 09 may appeal a decision made by the administrator to the office of administrative 10 hearings established under AS 44.64. An aggrieved party may appeal a final decision 11 to the superior court. 12 Sec. 39.35.007. Investment management of retirement system funds. The 13 Alaska Retirement Management Board established under 37.10.210 is the fiduciary of 14 the system funds. 15 Sec. 39.35.008. Definitions. In AS 39.35.001 - 39.35.008, 16 (1) "commissioner" means the commissioner of administration; 17 (2) "plan" means the retirement plan established in AS 39.35.095 - 18 39.35.680 or the retirement plan established in AS 39.35.700 - 39.35.990; 19 (3) "system" means all retirement plans established under the public 20 employees' retirement system. 21 * Sec. 87. AS 39.35 is amended by adding a new section to read: 22 Article 2. Public Employees' Defined Benefit Retirement Plan. 23 Sec. 39.35.095. Applicability of AS 39.35.095 - 39.35.680. The following 24 provisions of this chapter apply only to members first hired before July 1, 2006: 25 AS 39.35.095 - 39.35.680. 26 * Sec. 88. AS 39.35.100 is amended to read: 27 Sec. 39.35.100. Accounting. (a) The commissioner of administration shall 28 establish and maintain an adequate system of accounts and records for the plan 29 [SYSTEM]. The accounts and records shall be integrated with the accounts, records, 30 and procedures of the employers to the end that they operate most effectively and at 31 minimum expense, and that duplication of records and accounts is avoided.

01 (b) All income of the pension fund and all disbursements made by the fund 02 shall be credited or charged, whichever is appropriate, to the following accounts: 03 (1) An individual account shall be maintained for each employee to 04 record the amount of the employee's mandatory contributions collected under 05 AS 39.35.160(a). As of the last day of each calendar year and each fiscal year 06 beginning with June 30, 1969, this account shall be credited with interest, by applying 07 [ONE HALF OF] the prescribed rate of interest as determined by the board to the 08 balance in the account as of that date. Within one year following retirement, the 09 amount actuarially determined as necessary to fully fund the benefits to be received 10 shall be transferred first from the employee contribution account and, after the 11 employee contribution account has been exhausted, then from the employer 12 contribution account into the retirement reserve account. 13 (2) An individual account shall be maintained for each employee to 14 record the amount of the employee's voluntary contributions. As of the last day of 15 each calendar year and each fiscal year beginning with June 30, 1969, this account 16 shall be credited with interest, by applying [ONE HALF OF] the prescribed rate of 17 interest as determined by the board to the balance in the account as of that date. 18 Amounts that, before termination of employment, are withdrawn by an employee from 19 the employee's savings account shall be charged to that account. Upon retirement, the 20 amount actuarially determined as necessary to fully fund the benefits to be received 21 shall be transferred first from the employee savings account and, after the employee 22 savings account has been exhausted, then from the employer contribution account into 23 the retirement reserve account. 24 (3) A separate account for each employer shall be maintained. The 25 account shall be credited with contributions of the employer. This account shall be 26 charged with the employer's actuarial charge for pension, death benefits, and other 27 benefits paid under this plan [SYSTEM] to or on behalf of the employee of the 28 employer. After an allowance for interest credited to employee contribution accounts 29 and employee savings accounts, the investment income of the pension fund shall be 30 allocated to the retirement reserve account and to each employer asset share account 31 according to the ratio that the average of the assets in the account as of the beginning

01 and as of the end of the fiscal year bears to the total of the average balance of the 02 retirement reserve account and all employer accounts. 03 (4) An expense account shall be maintained for the plan [SYSTEM]. 04 This account shall be charged with all disbursements representing administrative 05 expenses incurred by the plan [SYSTEM]. At the end of the year the expense account 06 shall be allocated to each employer in accordance with (3) of this subsection. 07 Expenditures from this account shall be included in the governor's budget for each 08 fiscal year and are subject to approval by the legislature. 09 * Sec. 89. AS 39.35 is amended by adding a new section to article 1 to read: 10 Sec. 39.35.115. Defined benefit retirement plan. (a) A defined benefit 11 retirement plan for employees of the state, political subdivisions, and public 12 organizations is created. The plan becomes effective January 1, 1961, at which time 13 contributions by the employers and members begin. 14 (b) The retirement plan established by AS 39.35.095 - 39.35.680 is intended to 15 qualify under 26 U.S.C. 401(a) and 414(d) (Internal Revenue Code) as a qualified 16 retirement plan established and maintained by the state for its employees and for the 17 employees of political subdivisions, public corporations, and public organizations of 18 the state, and for the employees of other employers whose participation is authorized 19 by AS 39.35.095 - 39.35.680 and who participate in this plan. 20 (c) An amendment to AS 39.35.095 - 39.35.680 does not provide a person 21 with a vested right to a benefit if the Internal Revenue Service determines that the 22 amendment will result in disqualification of the plan under the Internal Revenue Code. 23 * Sec. 90. AS 39.35.120 is amended to read: 24 Sec. 39.35.120. Commencement of participation. (a) An employee of the 25 state shall be included in this system upon commencement of employment with the 26 state, or on January 1, 1961, whichever is later. Unless an employee participates in a 27 [HAS ELECTED TO PARTICIPATE IN THE OPTIONAL] university retirement 28 program under AS 14.40.661 - 14.40.799, an employee of a political subdivision or 29 public organization that becomes an employer shall be included in the system on the 30 effective date of the employer's participation or the date of the employee's 31 commencement of employment with the employer, whichever is later.

01 (b) Inclusion in the system is a condition of employment for an employee 02 except as otherwise provided for 03 (1) an elected official; 04 (2) an employee making an election under AS 39.35.150(b); and 05 (3) an employee of the university who participates in a [HAS 06 ELECTED TO PARTICIPATE IN THE OPTIONAL] university retirement program 07 under AS 14.40.661 - 14.40.799. 08 * Sec. 91. AS 39.35.131 is amended to read: 09 Sec. 39.35.131. Membership in teachers' and public employees' 10 retirement systems. (a) A person who is employed at least half-time in the plan 11 [SYSTEM] during the same period that the person is employed at least half-time in a 12 position in the teachers' retirement plan [SYSTEM] under AS 14.25.009 - 14.25.220 13 [AS 14.25] shall receive credited service under each plan [SYSTEM] for half-time 14 employment. However, the amount of credited service a person receives under the 15 plan [SYSTEM] during a school year may not exceed the amount necessary, when 16 added to the amount of credited service earned during the school year under the 17 teachers' retirement system, to equal one year of credited service. 18 (b) A person who was employed at least half-time in a position in the teachers' 19 retirement plan [SYSTEM] under AS 14.25.009 - 14.25.220 [AS 14.25] in the same 20 period that the person was employed at least half-time in a position in this plan 21 [SYSTEM] may claim credited service in both plan [SYSTEMS] for employment 22 before May 31, 1989. To obtain this credited service, the person shall claim the 23 service and verify the period of half-time employment. When eligibility for half-time 24 service credit has been established, an indebtedness shall be determined to the 25 retirement plan [SYSTEM] in which the person did not participate. The amount of 26 the indebtedness is the full actuarial cost of providing benefits for the credited service 27 claimed. Interest as prescribed by regulation accrues on that indebtedness beginning 28 on the later of July 1, 1989, or the date on which the member is first eligible to claim 29 the service. Any outstanding indebtedness existing at the time the person retires will 30 require an actuarial adjustment to the benefits payable based on that service. 31 * Sec. 92. AS 39.35.158 is amended to read:

01 Sec. 39.35.158. Administrative director of courts. An administrative 02 director of the Alaska court system who withdraws from the judicial retirement system 03 under AS 22.25.012 is eligible for membership in the plan [SYSTEM] and shall 04 receive credited service in the plan [SYSTEM] for service rendered as administrative 05 director. To be eligible for membership in the plan [SYSTEM] under this subsection, 06 the administrative director must contribute to the plan [SYSTEM] 07 (1) the amount the director would have contributed if the director had 08 been a member during the director's period of membership in the judicial retirement 09 system; and 10 (2) any contributions for services as administrative director refunded 11 by the plan [SYSTEM] at the time the director became a member of the judicial 12 retirement system. 13 * Sec. 93. AS 39.35.165(a) is amended to read: 14 (a) An employee who is eligible to purchase credited service under 15 AS 39.35.310, 39.35.330, 39.35.340, 39.35.342, 39.35.345, [39.35.350,] 39.35.360, or 16 39.35.370, a member who is eligible to purchase credited service under AS 39.35.375, 17 or an elected public official who is eligible to purchase credited service under 18 AS 39.35.381 is an employee for purposes of this section. An employee may, in lieu 19 of making payments directly to the plan, elect to have the employee's employer make 20 payments as provided in this section. 21 * Sec. 94. AS 39.35.165(b) is amended to read: 22 (b) An employee may elect to have the employer make payments for all or any 23 portion of the amounts payable for the employee's purchase of credited service 24 through a salary reduction program as follows: 25 (1) the amounts paid under a salary reduction program are in lieu of 26 contributions by the employee making the election; the electing employee's salary or 27 other compensation shall be reduced by the amount paid by the employer under this 28 subsection; 29 (2) the employee shall make an irrevocable election under this section 30 to purchase credited service as permitted in AS 39.35.310, 39.35.330, 39.35.340, 31 39.35.342, 39.35.345, [39.35.350,] 39.35.360, 39.35.370, 39.35.375, or 39.35.381 and

01 before the employee's termination of employment; the irrevocable election must 02 specify the number of payroll periods that deductions will be made from the 03 employee's compensation and the dollar amount of deductions for each payroll period 04 during the specified number of payroll periods; the deductions made under this 05 paragraph cease upon the earlier of the member's termination of employment with the 06 employer or the member's death; amounts paid by an employer under (f) of this 07 section may not be applied toward the payment of the dollar amount of the deductions 08 representing the portion of the credited service that is being purchased by the member 09 through payroll deduction in accordance with the member's irrevocable election under 10 this subsection; 11 (3) amounts paid by an employer under this subsection shall be treated 12 as employer contributions for the purpose of determining tax treatment under the 13 Internal Revenue Code; the amounts paid by the employer under this section may not 14 be included in the member's gross income for income tax purposes until those amounts 15 are distributed by refund or retirement benefit payments. 16 * Sec. 95. AS 39.35.165(f) is amended to read: 17 (f) The commissioner may accept rollover contributions from a member [AND 18 DIRECT TRANSFERS, AS DESCRIBED IN THIS SUBSECTION, FOR THE 19 PURCHASE, IN WHOLE OR IN PART, OF CREDITED SERVICE FOR THE 20 REINSTATEMENT, IN WHOLE OR IN PART, OF FORFEITED CREDITED 21 SERVICE UNDER AS 39.35.350]. A rollover contribution [OR TRANSFER] as 22 described in this subsection shall also be treated as employer contributions for the 23 purpose of determining tax treatment under the Internal Revenue Code and may be 24 made by any one or a combination of the following methods: 25 (1) subject to the limitations prescribed in 26 U.S.C. 401(a)(3) and 26 26 U.S.C. 402(c), accepting eligible rollover distributions directly from one or more 27 retirement programs of another employer that are qualified under 26 U.S.C. 401(a) or 28 accepting rollovers directly from a member; 29 (2) subject to the limitations prescribed in 26 U.S.C. 408(d)(3)(A)(ii), 30 accepting from a member conduit rollover contributions that are received by the 31 employee from one or more conduit rollover individual retirement accounts previously

01 established by the member; 02 (3) subject to the limitations prescribed in 26 U.S.C. 403(b)(13), 03 accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the 04 member, on or after January 1, 2002, from a tax sheltered annuity described in 26 05 U.S.C. 403(b); 06 (4) subject to the limitations prescribed in 26 U.S.C. 457(e)(17), 07 accepting direct trustee-to-trustee transfers of all or a portion of the accounts of the 08 member, on or after January 1, 2002, from an eligible deferred compensation plan of a 09 tax-exempt organization or a state or local government described in 26 U.S.C. 457(b); 10 (5) accepting direct trustee-to-trustee transfer from an account 11 established for the benefit of the member in AS 39.30.150 - 39.30.180 (Alaska 12 Supplemental Annuity Plan). 13 * Sec. 96. AS 39.35.165(g) is amended to read: 14 (g) Payments made under this section shall be applied to reduce the 15 employee's outstanding indebtedness described in AS 39.35.310, 39.35.330, 16 39.35.340, 39.35.342, 39.35.345, [39.35.350,] 39.35.360, 39.35.370, 39.35.375, or 17 39.35.381 at the time that the contributions are received by the plan. 18 * Sec. 97. AS 39.35.165(i) is amended to read: 19 (i) On satisfaction of the eligibility requirements of AS 39.35.310, 39.35.330, 20 39.35.340, 39.35.341, 39.35.345, [39.35.350,] 39.35.360, 39.35.370, 39.35.375, or 21 39.35.381, the requirements of this section, and the administrative filing requirements 22 specified by the commissioner, the plan shall adjust the employee's credited service 23 history and add any additional service credits acquired. 24 * Sec. 98. AS 39.35.200 is amended by adding a new subsection to read: 25 (d) An employee who receives a refund of contributions in accordance with 26 this section forfeits corresponding credited service under AS 39.35.095 - 39.35.680. 27 * Sec. 99. AS 39.35.270 is amended to read: 28 Sec. 39.35.270. Amount of employer's contributions. The amount of each 29 employer's contributions shall be determined by applying the employer's contribution 30 rate, as certified by the board, to the total compensation paid to the active employees 31 of the employer for each payroll period and by including any adjustments to

01 contributions required by AS 39.35.520(a). This amount shall be remitted by the 02 employer to the administrator in accordance with AS 39.35.610. 03 * Sec. 100. AS 39.35.270 is amended by adding a new subsection to read: 04 (b) The employer contribution rate may not be less than the rate required, after 05 subtracting the member contribution rate, to fully fund the actuarially calculated 06 benefits expected to be earned by active members during a fiscal year. 07 * Sec. 101. AS 39.35.340(f) is amended to read: 08 (f) An employee may not [CANNOT] be credited with a period of active 09 military service in the armed forces of the United States under this section if credit for 10 that military service was granted under AS 14.25.009 - 14.25.220 [AS 14.25]. 11 * Sec. 102. AS 39.35.340(h) is amended to read: 12 (h) The combined period of military service claimed under this section and 13 under AS 14.25.009 - 14.25.220 [AS 14.25] may not exceed five years. 14 * Sec. 103. AS 39.35.360(i) is amended to read: 15 (i) An employee who completes three years of credited service with an 16 employer, for which the employee makes contributions required by AS 39.35.095 - 17 39.35.680 [THIS CHAPTER], is entitled to credited service on a year-for-year basis 18 for service credited in the Civil Service Retirement System, rendered as an employee 19 of an Alaska Bureau of Indian Affairs (BIA) school, other than service as a teacher. 20 When eligibility for retroactive credited service under this subsection has been 21 established, an indebtedness of the employee to the plan [SYSTEM] shall be 22 determined as follows: (1) the employee's actual annual compensation, or the 23 calculated annual compensation for an employee who works fewer than 12 months, for 24 the most recent calendar year in which service is rendered to an employer before the 25 calendar year in which the employee first becomes eligible to claim service under this 26 subsection, multiplied by (2) the number of years of service in Alaska BIA schools 27 that is credited under this subsection, and this product multiplied by (3) six percent for 28 employees first eligible to claim this service before January 1, 1987, or eight and one- 29 half percent for employees first eligible to claim this service on or after January 1, 30 1987. Interest as prescribed by regulation accrues on the indebtedness beginning on 31 the date the employee may first claim the retroactive credited service. Any

01 outstanding indebtedness that exists at the time the employee retires requires an 02 actuarial adjustment to the benefits that are based on retroactive credited service under 03 this subsection. A retirement benefit payable under this subsection for Alaska BIA 04 service shall be reduced by an amount equal to the retirement benefits paid to the 05 member by the United States government for the same service. 06 * Sec. 104. AS 39.35.360(l) is amended to read: 07 (l) An administrative director of the Alaska Court System who withdraws 08 from the judicial retirement system under AS 22.25.012(b) is eligible for membership 09 in the plan [PUBLIC EMPLOYEES' RETIREMENT SYSTEM] and shall receive 10 credited service in this plan [SYSTEM] for service rendered as administrative 11 director. To be eligible for membership in this plan [SYSTEM] under this subsection, 12 the administrative director must contribute to the plan [SYSTEM] 13 (1) the amount that would have been contributed if the administrative 14 director had been a member during the period of the membership in the judicial 15 retirement system; and 16 (2) any contributions for service as administrative director refunded 17 from the plan [PUBLIC EMPLOYEES' RETIREMENT SYSTEM] at the time the 18 administrative director became a member of the judicial retirement system. 19 * Sec. 105. AS 39.35.370(g) is amended to read: 20 (g) When an employee who was employed as a dispatcher in a state trooper 21 office or in a police or fire department in the plan [PUBLIC EMPLOYEES' 22 RETIREMENT SYSTEM] applies for appointment to retirement, the employee may 23 convert the credited service for that position to credited service as a peace officer by 24 claiming the service as peace officer service. An employee who has converted 25 credited service to peace officer service under this subsection shall be treated as a 26 peace officer for purposes of AS 39.35.095 - 39.35.680 [THIS CHAPTER]. When the 27 member claims this credited service as peace officer service, an indebtedness of the 28 member to the plan [SYSTEM] shall be established. The indebtedness is equal to the 29 full actuarial cost of the conversion of the credited service to treatment as peace 30 officer service. Any outstanding indebtedness that exists at the time the member is 31 appointed to retirement shall [WILL] require an actuarial adjustment to the benefits

01 payable based upon the conversion of the credited service. 02 * Sec. 106. AS 39.35.375(a) is amended to read: 03 (a) An active or inactive member who has never been vested in this plan 04 [SYSTEM] or in the teachers' retirement plan [SYSTEM] under AS 14.25.009 - 05 14.25.220 [AS 14.25], who has at least two years of credited service in this plan 06 [SYSTEM], and who has membership service in the teachers' retirement system may 07 claim credited service in this plan [SYSTEM] in an amount equal to the membership 08 service the member has in the teachers' retirement system. The claimed credited 09 service may be added to service earned under AS 39.35.095 - 39.35.680 [THIS 10 CHAPTER] to enable the member to qualify for a public service benefit under this 11 section. The member may not claim credited service for membership service for 12 which the member has received a refund under AS 14.25.150 unless the member fully 13 pays the indebtedness as established under AS 14.25.063. The member may not claim 14 credited service in this plan [SYSTEM] based on unused sick leave under 15 AS 14.25.115. 16 * Sec. 107. AS 39.35.375(b) is amended to read: 17 (b) To claim credited service under this section, the member shall file a 18 written request with the administrator when the member applies to retire. The 19 administrator shall determine the full actuarial cost of benefits based on the member's 20 total credited service and shall transfer from the teachers' retirement system to this 21 plan [SYSTEM] an amount equal to the sum of the member contributions and any 22 indebtedness payments to the teachers' retirement system and the employer 23 contributions to the teachers' retirement system made on behalf of the employee 24 together with interest earned on those contributions and indebtedness payments. If the 25 amount to be transferred, when combined with the amount of employee contributions 26 and indebtedness payments to this plan [SYSTEM] and the amount of employer 27 contributions on behalf of the employee in this plan [SYSTEM], and interest earned 28 on contributions and indebtedness payments for the employee, is less than the full 29 actuarial cost computed under this subsection, an indebtedness to the plan [SYSTEM] 30 equal to the amount of the difference is established. Interest as prescribed by 31 regulation accrues on the indebtedness. The member must pay any outstanding

01 indebtedness existing at the time the member applies for retirement in full before the 02 member is appointed to retirement under this section. 03 * Sec. 108. AS 39.35.375(c) is amended to read: 04 (c) A member is entitled to receive a public service benefit under this section 05 if the member has at least a total of five years credited service under AS 39.35.095 - 06 39.35.680 [THIS CHAPTER] and credited service from the teachers' retirement plan 07 under AS 14.25.009 - 14.25.220 [SYSTEM] claimed under this section. A public 08 service benefit shall be calculated using the higher of the average monthly 09 compensation for service in this plan [SYSTEM] or the average base salary for 10 service in the teachers' retirement plan under AS 14.25.009 - 14.25.220 [SYSTEM]. 11 The amount of the benefit shall be calculated in accordance with AS 39.35.370(c). 12 * Sec. 109. AS 39.35.375(d) is amended to read: 13 (d) Credited service earned under either this plan [SYSTEM] or the teachers' 14 retirement system that has been claimed for a public service benefit under this section 15 may not be used for any other purpose. A member who claims credited service under 16 this section loses all rights to benefits under AS 14.25 based on the claimed credited 17 service. A member may not claim credited service under this section unless the 18 member claims all of the membership service the member has in the teachers' 19 retirement system. A public service benefit does not constitute a normal or early 20 retirement benefit for purposes of qualifying for a conditional service retirement 21 benefit under AS 14.25.125 or AS 39.35.385. 22 * Sec. 110. AS 39.35.375(f) is amended to read: 23 (f) Notwithstanding AS 14.25.063 and AS 39.35.350, a former member of the 24 teachers' retirement system who is an active member or inactive member of this plan 25 [SYSTEM] may reinstate, under this section, membership service earned under 26 AS 14.25 for which the member received a refund of contributions. 27 * Sec. 111. AS 39.35.375(f) is amended to read: 28 (f) Notwithstanding AS 14.25.063 [AND AS 39.35.350], a former member of 29 the teachers' retirement system who is an active member or inactive member of this 30 plan may reinstate, under this section, membership service earned under AS 14.25 for 31 which the member received a refund of contributions.

01 * Sec. 112. AS 39.35.375(g) is amended to read: 02 (g) If a member retires under this section and subsequently returns to work for 03 an employer under this plan [SYSTEM] or the teachers' retirement system, benefits 04 under this section shall cease during the period of reemployment and shall 05 recommence when the reemployment is ended. The credited service earned during the 06 period of reemployment may not be added to the credited service claimed for a public 07 service benefit under this section. If a member vests and meets the other eligibility 08 requirements under this system or the teachers' retirement system during the 09 reemployment, the member is entitled to a benefit under AS 14.25.009 - 14.25.220 10 [AS 14.25] or 39.35.095 - 39.35.680 [AS 39.35], as appropriate. 11 * Sec. 113. AS 39.35.375 is amended by adding a new subsection to read: 12 (h) In this section, 13 (1) "teachers' retirement system" and "teachers' retirement system 14 under AS 14.25" means the teachers' retirement plan established in AS 14.25.009 - 15 14.25.220; 16 (2) "membership service earned under AS 14.25" means membership 17 service earned under AS 14.25.009 - 14.25.220. 18 * Sec. 114. AS 39.35.381(a) is amended to read: 19 (a) An elected public officer is eligible for a public officer benefit if the officer 20 is retired under AS 14.25.009 - 14.25.220 [AS 14.25 (TEACHERS' RETIREMENT 21 SYSTEM)]. Only fully paid credited service as an elected public officer of a 22 municipality or other political subdivision, earned while the municipality or political 23 subdivision was an employer under this plan [SYSTEM] and while the person was 24 employed full-time under AS 14.25.009 - 14.25.220 [AS 14.25], may be counted 25 under this section. 26 * Sec. 115. AS 39.35.410(f) is amended to read: 27 (f) An employee is not entitled to an occupational disability benefit unless the 28 employee files an application for it with the administrator within 90 days of the date of 29 terminating employment. If the employee is unable to meet a filing requirement of 30 this subsection, it may be waived by the commissioner [PUBLIC EMPLOYEES' 31 RETIREMENT BOARD] if there are extraordinary circumstances that resulted in the

01 employee's inability to meet the filing requirement. [THE BOARD MAY 02 DELEGATE THE AUTHORITY TO WAIVE A FILING DEADLINE UNDER THIS 03 SUBSECTION TO THE ADMINISTRATOR.] 04 * Sec. 116. AS 39.35.475(a), as that subsection read following amendment by sec. 34, ch. 05 146, SLA 1980, until amended by sec. 41, ch. 82, SLA 1986, is amended to read: 06 (a) When the administrator determines that the cost of living has increased and 07 that the financial condition of the retirement fund permits, the administrator [HE] 08 shall increase benefit payments to persons receiving benefits under this plan. For 09 purposes of this subsection, the financial condition of the fund would only permit 10 an increase in benefits when the ratio of total fund assets to the accrued liability 11 meets or exceeds 105 percent. In this subsection, "accrued liability" means the 12 present value of all member benefits accrued by member service in this plan 13 [SYSTEM]. 14 * Sec. 117. AS 39.35.485(a) is amended to read: 15 (a) An employee who is eligible for a benefit calculated in accordance with 16 AS 39.35.370(c) is entitled to a benefit of at least $25 a month for each year of 17 credited service, not including adjustments made under AS 39.35.340 for military 18 service, [AS 39.35.350 FOR REINSTATEMENT OF CREDITED SERVICE,] 19 AS 39.35.360 for credit for earlier service, AS 39.35.370(c) for early retirement, 20 AS 39.35.420 for nonoccupational death benefits, AS 39.35.450 for the survivor's 21 option, former AS 39.35.460 for the level income option, AS 39.35.475 for the post- 22 retirement pension adjustment, and AS 39.35.480 for the cost of living. 23 * Sec. 118. AS 39.35.520(c) is amended to read: 24 (c) At least quarterly, [AT EACH REGULARLY SCHEDULED MEETING 25 OF THE PUBLIC EMPLOYEES' RETIREMENT BOARD,] the administrator shall 26 report to the commissioner of administration [BOARD] on all situations since the 27 administrator's last report in which an adjustment has been prohibited under (b) of this 28 section. If the commissioner of administration [BOARD] finds that there is reason 29 to believe that one or more of the conditions set out in (b) of this section have not been 30 met, the administrator shall notify the member or beneficiary that an adjustment will 31 be made to recover the overpayment. A member or beneficiary who receives notice of

01 adjustment under this subsection may file a request with the commissioner of 02 administration [APPEAL TO THE BOARD] for a waiver of the adjustment under 03 AS 39.35.522. An adjustment may not be required while the waiver request 04 [APPEAL] is pending. 05 * Sec. 119. AS 39.35.522(a) is amended to read: 06 (a) Upon request [APPEAL] by an affected member or beneficiary under (b) 07 of this section, the commissioner of administration [BOARD] may waive an 08 adjustment or any portion of an adjustment made under AS 39.35.520 if, in the 09 opinion of the commissioner of administration [BOARD], 10 (1) the adjustment or portion of the adjustment will cause undue 11 hardship to the member or beneficiary; 12 (2) [REPEALED 13 (3) REPEALED 14 (4)] the adjustment was not the result of erroneous information 15 supplied by the member or beneficiary; 16 (3) [(5)] before the adjustment was made, the member or beneficiary 17 received confirmation from the administrator that the employee's or beneficiary's 18 records were correct; and 19 (4) [(6)] the member or beneficiary had no reasonable grounds to 20 believe the employee's or beneficiary's records were incorrect before the adjustment 21 was made. 22 * Sec. 120. AS 39.35.535(a) is repealed and reenacted to read: 23 (a) Except as provided in (d) of this section, the following persons are entitled 24 to major medical insurance coverage under this section: 25 (1) for employees first hired before July 1, 1986, 26 (A) an employee who is receiving a monthly benefit from the 27 plan and who has elected coverage; 28 (B) the spouse and dependent children of the employee 29 described in (A) of this paragraph; 30 (C) the surviving spouse of a deceased employee who is 31 receiving a monthly benefit from the plan and who has elected coverage;

01 (D) the dependent children of a deceased employee who are 02 dependent on the surviving spouse described in (C) of this paragraph; 03 (2) for members first hired on or after July 1, 1986, 04 (A) an employee who is receiving a monthly benefit from the 05 plan and who has elected coverage for the employee; 06 (B) the spouse of the employee described in (A) of this 07 paragraph if the employee elected coverage for the spouse; 08 (C) the dependent children of the employee described in (A) of 09 this paragraph if the employee elected coverage for the dependent children; 10 (D) the surviving spouse of a deceased employee who is 11 receiving a monthly benefit from the plan and who has elected coverage; 12 (E) the dependent children of a deceased employee who are 13 dependent on the surviving spouse described in (D) of this paragraph if the 14 surviving spouse has elected coverage for the dependent children. 15 * Sec. 121. AS 39.35.680(2) is amended to read: 16 (2) "actuarial adjustment" means the adjustment necessary to obtain 17 equality in value of the aggregate expected payments under two different forms of 18 pension payments, considering expected mortality and interest earnings on the basis of 19 assumptions, factors, and methods specified in regulations issued under this plan 20 [SYSTEM] that are formally adopted [UNDER AS 39.35.042] by the board that 21 clearly preclude employer discretion in the determination of the amount of any 22 member's benefit; 23 * Sec. 122. AS 39.35.680(6) is amended to read: 24 (6) "board" means the Alaska Retirement Management [PUBLIC 25 EMPLOYEES RETIREMENT] Board; 26 * Sec. 123. AS 39.35.680(21) is amended to read: 27 (21) "member" or "employee" 28 (A) means a person eligible to participate in the system and 29 who is covered by the system; 30 (B) includes 31 (i) an active member;

01 (ii) an inactive member; 02 (iii) a vested member; 03 (iv) a deferred vested member; 04 (v) a nonvested member; 05 (vi) a disabled member; 06 (vii) a retired member; 07 (viii) an elected public officer under AS 39.35.381; 08 (C) does not include 09 (i) former members; 10 (ii) persons compensated on a contractual or fee basis; 11 (iii) casual or emergency workers or nonpermanent 12 employees as defined in AS 39.25.200; 13 (iv) persons covered by the Alaska Teachers' 14 Retirement System except as provided under AS 39.35.131 and 15 39.35.381, or persons covered by a [THE OPTIONAL] university 16 retirement program; 17 (v) employees of the division of marine transportation 18 engaged in operating the state ferry system who are covered by a union 19 or group retirement system to which the state makes contributions; 20 (vi) justices of the supreme court or judges of the court 21 of appeals or of the superior or district courts of Alaska; 22 (vii) the administrative director of courts appointed 23 under art. IV, sec. 16 of the state constitution unless the director 24 becomes a member under AS 39.35.158; 25 (viii) members of the elected public officers' retirement 26 system (former AS 39.37); and 27 (ix) contractual employees of the legislative branch of 28 state government under AS 24.10.060(f); 29 (D) may include employees of the division of marine 30 transportation excluded under (C)(v) of this paragraph provided that 31 (i) the State of Alaska formally agrees to their inclusion

01 through the process of collective bargaining; and 02 (ii) no collective bargaining agreement has the effect of 03 obligating contributions made by the state under AS 39.30.150 in the 04 event the state resumes participation in the federal social security 05 system; 06 * Sec. 124. AS 39.35.680(34) is amended to read: 07 (34) "qualified domestic relations order" means a divorce or 08 dissolution judgment under AS 25.24, including an order approving a property 09 settlement, that 10 (A) creates or recognizes the existence of an alternate payee's 11 right to, or assigns to an alternate payee the right to, receive all or a portion of 12 employee contribution account or the benefits payable with respect to an 13 employee; 14 (B) sets out the name and last known mailing address, if any, of 15 the employee and of each alternate payee covered by the order; 16 (C) sets out the amount or percentage of the employee's benefit, 17 or of any survivor's benefit, to be paid to the alternate payee, or sets out the 18 manner in which that amount or percentage is to be determined; 19 (D) sets out the number of payments or period to which the 20 order applies; 21 (E) sets out the retirement plan [SYSTEM] to which the order 22 applies; 23 (F) does not require any type or form of benefit or any option 24 not otherwise provided by AS 39.35.095 - 39.35.680 [THIS CHAPTER]; 25 (G) does not require an increase of benefits in excess of the 26 amount provided by AS 39.35.095 - 39.35.680 [THIS CHAPTER], determined 27 on the basis of actuarial value; and 28 (H) does not require the payment to an alternate payee of 29 benefits that are required to be paid to another alternate payee under another 30 order previously determined to be a qualified domestic relations order; 31 * Sec. 125. AS 39.35.680 is amended by adding new paragraphs to read:

01 (41) "commissioner" means the commissioner of administration; 02 (42) "plan" means the retirement plan established in AS 39.35.095 - 03 39.35.680. 04 * Sec. 126. AS 39.35 is amended by adding new sections to read: 05 Article 9. Employees First Hired on or after July 1, 2006. 06 Sec. 39.35.700. Applicability of AS 39.35.700 - 39.35.990. The provisions of 07 AS 39.35.700 - 39.35.990 apply only to members first hired on or after July 1, 2006, 08 or to members who transfer into the defined contribution plan under AS 39.35.940. 09 Sec. 39.35.710. Defined contribution retirement plan established; federal 10 qualification requirements. (a) A defined contribution retirement plan is established 11 for employees of the state or a political subdivision or public organization of the state. 12 (b) The defined contribution retirement plan is a plan in which savings are 13 accumulated in an individual retirement account for the exclusive benefit of the 14 member or beneficiaries. The plan is established effective July 1, 2006, at which time 15 contributions by employers and members begin. 16 (c) The retirement plan established by AS 39.35.700 - 39.35.990 is intended to 17 qualify under 26 U.S.C. 401(a) and 414(d) (Internal Revenue Code) as a qualified 18 retirement plan established and maintained by the state for its employees, for the 19 employees of political subdivisions, public corporations, and public organizations of 20 the state, and for the employees of other employers whose participation is authorized 21 by AS 39.35.700 - 39.35.990 and who participate in the plan set out in AS 39.35.700 - 22 39.35.990. 23 (d) An amendment to AS 39.35.700 - 39.35.990 does not provide a person 24 with a vested right to a benefit if the Internal Revenue Service determines that the 25 amendment will result in disqualification of the plan under the Internal Revenue Code. 26 Sec. 39.35.720. Membership. An employee who becomes a member on or 27 after July 1, 2006, shall participate in the plan set out in AS 39.35.700 - 39.35.990. 28 Sec. 39.35.730. Contributions by members. (a) Each member shall 29 contribute to the member's individual account an amount equal to eight percent of the 30 member's compensation from July 1 to the following June 30. 31 (b) Subject to the limitations on contributions under AS 39.35.780, a member

01 may elect to make additional contributions to the member's individual account. 02 (c) The employer shall deduct the contribution from the member's 03 compensation at the end of each payroll period, and the contribution shall be credited 04 by the plan to the member's individual account. The contributions shall be deducted 05 from member's compensation before the computation of applicable federal taxes and 06 shall be treated as employer contributions under 26 U.S.C. 414(h)(2). A member may 07 not have the option of making the payroll deduction directly in cash instead of having 08 the contribution picked up by the employer. 09 Sec. 39.35.740. Employment contributions mandatory. Contributions of 10 employees shall be made by payroll deductions. Every included employee shall be 11 considered to consent to payroll deductions. It is of no consequence that a payroll 12 deduction may cause the compensation paid in cash to an employee to be reduced 13 below the minimum required by law. Payment of an employee's compensation, less 14 payroll deductions, is a full and complete discharge and satisfaction of all claims and 15 demands by the employee relating to remuneration of services during the period 16 covered by the payment, except with respect to the benefits provided under the plan. 17 Sec. 39.35.750. Contributions by employers. (a) An employer shall 18 contribute to each member's individual account an amount equal to five percent of the 19 member's compensation from July 1 to the following June 30. 20 (b) An employer shall also contribute an amount equal to a percentage, as 21 certified by the board, of each member's compensation from July 1 to the following 22 June 30 to pay for retiree major medical insurance. This contribution shall be paid 23 into the group health and life benefits fund established by the commissioner of 24 administration under AS 39.30.095 and shall be accounted for in accordance with 25 regulations established by the commissioner. 26 (c) Notwithstanding (b) of this section, the employer contribution for retiree 27 major medical insurance for fiscal year 2006 shall be 1.75 percent of each member's 28 compensation from July 1 to the following June 30. 29 (d) An employer shall also make contributions to the health reimbursement 30 arrangement plan under AS 39.30.300. 31 (e) An employer shall make annual contributions to the plan in an amount

01 determined by the board to be actuarially required to fully fund the cost of providing 02 occupational disability and occupational death benefits under AS 39.35.890 and 03 39.35.892. The contribution required under this subsection for peace officers and fire 04 fighters and the contribution required under this subsection for other employees shall 05 be separately calculated based on the actuarially calculated costs for each group of 06 employees. 07 Sec. 39.35.760. Rollover contributions and distributions. (a) An employee 08 entering the plan may elect, at the time and in the manner prescribed by the 09 administrator, to have all or part of a direct rollover distribution from an eligible 10 retirement plan owned by the member paid directly into the member's individual 11 account. 12 (b) Rollover contributions do not count as a purchase of membership service 13 for the purpose of determining years of service. 14 (c) A distributee may elect, at the time and in the manner prescribed by the 15 administrator, to have all or part of an eligible rollover distribution paid directly to an 16 eligible retirement plan specified by the distributee in the direct rollover. 17 (d) In this section, 18 (1) "direct rollover" means the payment of an eligible rollover 19 distribution by the plan to an eligible retirement plan specified by a distributee who is 20 eligible to elect a direct rollover; 21 (2) "distributee" means a member, or a beneficiary who is the 22 surviving spouse of the member, or an alternate payee; 23 (3) "eligible retirement plan" means 24 (A) a conduit individual retirement account described in 26 25 U.S.C. 408(d)(3)(A); 26 (B) an annuity plan described in 26 U.S.C. 403(a); 27 (C) a qualified trust described in 26 U.S.C. 401(a); 28 (D) an annuity plan described in 26 U.S.C. 403(b); or 29 (E) a governmental plan described in 26 U.S.C. 457(b); 30 (4) "eligible rollover distribution" means a distribution of all or part of 31 a total account to a distributee, except for

01 (A) a distribution that is one of a series of substantially equal 02 installments payable not less frequently than annually over the life expectancy 03 of the distributee or the joint and last survivor life expectancy of the distributee 04 and the distributee's designated beneficiary, as defined in 26 U.S.C. 401(a)(9); 05 (B) a distribution that is one of a series of substantially equal 06 installments payable not less frequently than annually over a specified period 07 of 10 years or more; 08 (C) a distribution that is required under 26 U.S.C. 401(a)(9); 09 (D) the portion of any distribution that is not includable in 10 gross income; 11 (E) a distribution that is on account of hardship; and 12 (F) other distributions that are reasonably expected to total less 13 than $200 during a year. 14 Sec. 39.35.770. Transmittal of contributions. All contributions deducted in 15 accordance with AS 39.35.700 - 39.35.990 shall be transmitted to the plan for deposit 16 in the trust fund as soon as administratively feasible, but in no event later than 15 days 17 following the close of the payroll period. 18 Sec. 39.35.780. Limitations on contributions. Notwithstanding any other 19 provisions of this plan, the annual additions to each member's individual account 20 under this plan and under all defined contribution plans of the employer required to be 21 aggregated with the contributions from this plan under the provisions of 26 U.S.C. 415 22 may not exceed, for any limitation year, the amount permitted under 26 U.S.C. 415 at 23 any time. If the amount of a member's defined contribution plan contributions exceeds 24 the limitation of 26 U.S.C. 415(c) for any limitation year, the administrator shall take 25 any necessary remedial action to correct an excess contribution. The provisions of 26 26 U.S.C. 415, and the regulations adopted under that statute, as applied to qualified 27 defined contribution plans of governmental employees are incorporated as part of the 28 terms and conditions of the plan. 29 Sec. 39.35.790. Vesting. (a) A participating member is immediately and 30 fully vested in that member's contributions and related earnings. 31 (b) A member shall be fully vested in the employer contributions made on that

01 member's behalf, and related earnings, after five years of service. A member is 02 partially vested in the employer contributions made on that member's behalf, and the 03 related earnings, in the ratio of 04 (1) 25 percent with two years of service; 05 (2) 50 percent with three years of service; and 06 (3) 75 percent with four years of service. 07 Sec. 39.35.800. Investment of individual accounts. (a) The board shall 08 provide a range of investment options and permit a participant to exercise investment 09 control over the participant's assets in the member's individual account as provided in 10 this section. If a participant exercises control over the assets in the individual account, 11 the participant is not considered a fiduciary for any reason on the basis of exercising 12 that control. 13 (b) A participant may direct investment of plan funds held in an account 14 among available investment funds in accordance with rules established by the board. 15 (c) A participant may elect to change or transfer all or a portion of the 16 participant's existing account balance among available investment funds not more 17 often than once each day in accordance with the rules established by the administrator. 18 Only the last election received by the administrator before the transmittal of 19 contributions to the trust fund for allocation to the individual account shall be used to 20 direct the investment of the contributions received. 21 (d) Except to the extent clearly set out in the terms of the investment plans 22 offered by the employer to the employee, the employer is not liable to the participant 23 for investment losses if the prudent investment standard has been met. 24 (e) The employer, administrator, state, board, or a person or entity who is 25 otherwise a fiduciary is not liable by reason for any participant's investment loss that 26 results from the participant's directing the investment of plan assets allocated to the 27 participant's account. 28 (f) To the extent that a member's individual account has been divided as 29 provided in a qualified domestic relations order between participants, each participant 30 shall be treated as the holder of a separate individual account for purposes of 31 investment yields, decisions, transfers, and time limitations imposed by this section.

01 Sec. 39.35.810. Distribution election at termination. (a) A member is 02 eligible to elect distribution of the member's account in accordance with this section 03 60 days after termination of employment. 04 (b) Notwithstanding (a) of this section, distribution of all or a portion of the 05 individual account of a member may take place before the 60th day after the 06 termination of employment with the approval of the administrator if the member 07 makes a written request for a distribution under this subsection. The member's spouse 08 must consent to the request in writing if the member is married. Distribution of an 09 individual account may only be made on account of an immediate and heavy financial 10 need of the member for the following reasons and in the amount the need is 11 demonstrated for 12 (1) medical care described in 26 U.S.C. 213(d) incurred by the 13 member, the member's spouse, or the member's dependent, or necessary to obtain that 14 medical care; 15 (2) the purchase of a principal residence for the member; 16 (3) postsecondary education tuition and related educational fees for the 17 next 12-month period for the member, the member's spouse, or a dependent of the 18 member; in this paragraph, "dependent" has the meaning given in 26 U.S.C. 152; 19 (4) prevention of the eviction of the member from the member's 20 principal residence or foreclosure on the mortgage of the member's principal 21 residence; or 22 (5) any need prescribed by the United States Department of the 23 Treasury, Internal Revenue Service, in a revenue ruling, notice, or other document of 24 general applicability that satisfies the safe harbor definition of hardship under 25 regulations adopted under 26 U.S.C. 401(k). 26 (c) If a member dies before benefits commence, the member's beneficiary is 27 immediately eligible to elect distribution of the member's share of the member's 28 individual account. 29 (d) Distributions are payable to an alternate payee in accordance with the 30 terms and conditions of a qualified domestic relations order that is received and 31 approved by the administrator as specified in AS 39.35.860.

01 (e) Distributions that are being paid to a member may not be affected by the 02 member's subsequent reemployment with the employer. Upon reemployment, a new 03 individual account shall be established for the member to which any future 04 contributions shall be allocated. Upon subsequent termination of employment, the 05 member's new individual account shall be distributed in accordance with this section. 06 Sec. 39.35.820. Forms of distribution. (a) A participant may elect to receive 07 the participant's share of the individual account in a 08 (1) lump sum payment, which is a single payment of the entire balance 09 in the account; 10 (2) periodic lump sum payment, which is a payment of a portion of the 11 balance in the account, not more than twice each year; 12 (3) period certain annuity payment, which is an annuity payable in a 13 fixed number of monthly installments for a duration of 60, 120, or 180 months; 14 (4) life annuity with a period certain payment, which is an annuity 15 payable until the later of the first day of the month in which the annuitant's death 16 occurs, or the date on which the payment of a fixed number of monthly installments is 17 completed; the period certain for installments is 120 or 180 months; 18 (5) single life annuity payment, which is an annuity payable monthly 19 until the first of the month in which the annuitant's death occurs; or 20 (6) joint and survivor annuity payment, which is an annuity payable 21 monthly to the member until the first of the month in which the member's death 22 occurs; after the member's death, a survivor annuity equal to 50 percent or 100 percent 23 of the member's benefit, as previously elected by the member, shall be paid monthly to 24 the joint annuitant for the remainder of the survivor's lifetime. 25 (b) Upon the death of an annuitant whose payments have commenced, an 26 annuitant's beneficiary shall receive further payments only to the extent provided in 27 accordance with the form of payment that was being made to the annuitant. The 28 remaining portion of the interest shall continue to be distributed at least as rapidly as 29 under the method of distribution being used before the annuitant's death. 30 (c) If a participant dies before the distribution commencement date, 31 distribution of the participant's entire interest to a beneficiary shall be payable in any

01 form other than a joint and survivor annuity. 02 (d) If an unmarried member or other participant fails to elect a form of 03 payment before the distribution commencement date, the account shall be paid to a 04 beneficiary in the form of a lump sum to the extent required by the minimum 05 distribution requirements set out in the Internal Revenue Code. If a married member 06 fails to elect a form of payment before the distribution commencement date, the 07 account shall be paid in the form of a 50 percent joint and survivor annuity, with the 08 member's spouse as the joint annuitant. 09 Sec. 39.35.830. Manner of electing distributions. (a) Any election or any 10 alteration or revocation of a prior election by a participant for any purpose under this 11 plan shall be on forms or made in a manner prescribed for that purpose by the plan 12 administrator. To be effective, the forms required or the required action for any 13 purpose under this plan must be completed and received in accordance with 14 regulations adopted by the commissioner of administration. 15 (b) At any time, but not less than seven days before the benefit 16 commencement date, a member, alternate payee, or beneficiary may change 17 (1) the form of payment election; 18 (2) an election to commence benefits; or 19 (3) the joint annuitant designation. 20 (c) Changes in elections are not allowed on or after seven days before the 21 benefit commencement date. 22 Sec. 39.35.840. Distribution requirements. (a) Payments to a participant 23 shall commence as soon as administratively feasible following the distribution 24 commencement date. The distribution commencement date is the first date on which 25 one of the following occurs: 26 (1) a member meets the requirements of AS 39.35.810 and has made a 27 complete application for payment under AS 39.35.830; 28 (2) a participant has elected to defer receipt of the account to a date 29 specified, the date has been attained, and the participant has made a complete 30 application for payment; 31 (3) a member attains normal retirement age and has not made an

01 application for payment or elected to defer receipt of the account to a date later than 02 normal retirement age; 03 (4) a member's beneficiary does not make an application for benefits 04 and five years have elapsed since the member's death; 05 (5) notwithstanding (a) of this section, a participant whose account has 06 a balance of $1,000 or less meets the requirements of AS 39.35.810, at which time the 07 participant must take payment of the participant's account. 08 (b) The entire interest of a member must be distributed or must begin to be 09 distributed not later than the member's required beginning date. 10 (c) If a member dies after the distribution of the member's interest has begun 11 but before the distribution has been completed, the remaining portion of the interest 12 shall continue to be distributed at least as rapidly as under the method of distribution 13 being used before the member's death. 14 (d) If a member has made a distribution election and dies before the 15 distribution of the member's interest begins, distribution of the member's entire interest 16 shall be completed by December 31 of the calendar year containing the fifth 17 anniversary of the member's death. However, if any portion of the member's interest 18 is payable to a designated beneficiary, distributions may be made over the life of the 19 designated beneficiary or over a period certain not greater than the life expectancy of 20 the designated beneficiary, commencing on or before December 31 of the calendar 21 year immediately following the calendar year in which the member died, and, if the 22 designated beneficiary is the member's surviving spouse, the date distributions are 23 required to begin may not be earlier than the later of December 31 of the calendar year 24 (1) immediately following the calendar year in which the member died, or (2) in which 25 the member would have attained 70 1/2 years of age, whichever is earlier. If the 26 surviving spouse dies after the member but before payments to the spouse have begun, 27 the provisions of this subsection apply as if the surviving spouse were the member. 28 An amount paid to a child of the member shall be treated as if it were paid to the 29 surviving spouse if the amount becomes payable to the surviving spouse when the 30 child reaches the age of majority. 31 (e) If a member has not made a distribution election before the member's

01 death, the member's designated beneficiary must elect the method of distribution not 02 later than December 31 of the calendar year (1) in which distributions would be 03 required to begin under this section, or (2) that contains the fifth anniversary of the 04 date of death of the member, whichever is earlier. If the member does not have a 05 designated beneficiary or if the designated beneficiary does not elect a method of 06 distribution, distribution of the member's entire interest must be completed by 07 December 31 of the calendar year containing the fifth anniversary of the member's 08 death. 09 (f) For purposes of (b) of this section, distribution of a member's interest is 10 considered to begin (1) on the member's required beginning date, or (2) if the 11 designated beneficiary is the member's surviving spouse and the surviving spouse dies 12 after the member but before payments to the spouse have begun, on the date 13 distribution is required to begin to the surviving spouse. If distribution in the form of 14 an annuity irrevocably commences to the member before the required beginning date, 15 the date distribution is considered to begin is the date that the distribution actually 16 commences. 17 (g) Notwithstanding any contrary provisions of AS 39.35.700 - 39.35.990, the 18 requirements of this section apply to all distributions of a member's interest and take 19 precedence over any inconsistent provisions of AS 39.35.700 - 39.35.990. 20 (h) All distributions required under this section are determined and made in 21 accordance with 26 U.S.C. 401(a)(9) and regulations adopted under that statute, 22 including any minimum distribution incidental benefit requirement. 23 (i) In this section, 24 (1) "designated beneficiary" means the individual who is designated as 25 the beneficiary under the plan in accordance with 26 U.S.C. 401(a)(9) and regulations 26 adopted under that statute; 27 (2) "required beginning date" means the first day of April of the 28 calendar year following the calendar year in which the member either attains 70 1/2 29 years of age or actually terminates employment, whichever is later. 30 Sec. 39.35.850. Designation of beneficiary. (a) Each participant shall have 31 the right to designate a beneficiary and shall have the right, at any time, to revoke the

01 designation or to substitute another beneficiary, subject to the following limitation: if a 02 married member elects a nonspouse beneficiary, the value of the benefit payable to the 03 beneficiary may not exceed 50 percent of the member's portion of the account balance, 04 and the member's spouse shall automatically be considered the beneficiary for the 05 remaining 50 percent of the account balance, unless the spouse consents to the 06 beneficiary designation in a writing that is notarized or witnessed by the administrator. 07 If the spouse consents in this manner, a married member may designate a nonspouse 08 beneficiary for the entire benefit or any portion the benefit as part of an available form 09 of payment contained in this plan, 10 (1) except to the extent a qualified domestic relations order filed with 11 the administrator provides for payment to a former spouse or other dependent of the 12 member; or 13 (2) unless the member filed a revocation of beneficiary accompanied 14 by a written consent to the revocation from the present spouse and each person entitled 15 under the order; however, consent of the present spouse is not required if the member 16 and the present spouse had been married for less than one year on the date of the 17 member's death and if the member established when filing the revocation that the 18 member and the present spouse were not cohabiting. 19 (b) Except as provided in (a) of this section, the member may change or 20 revoke the designation without notice to the beneficiary or beneficiaries at any time. 21 If a member designates more than one beneficiary, each shares equally unless the 22 member specifies a different allocation or preference. The designation of a 23 beneficiary, a change or revocation of a beneficiary, and a consent to revocation of a 24 beneficiary shall be made on a form provided by the administrator and is not effective 25 until filed with the administrator. 26 (c) If a member fails to designate a beneficiary, or if no designated beneficiary 27 survives the member, the death benefit shall be paid 28 (1) to the surviving spouse or, if there is none surviving; 29 (2) to the surviving children of the member in equal parts or, if there 30 are none surviving; 31 (3) to the surviving parents in equal parts or, if there are none

01 surviving; 02 (4) to the estate. 03 (d) A person claiming entitlement to benefits payable under AS 39.35.700 - 04 39.35.990 as a consequence of a member's death shall provide the administrator with a 05 marriage certificate, divorce or dissolution judgment, or other evidence of entitlement. 06 Documents establishing entitlement may be filed with the administrator immediately 07 after a change in the member's marital status. If the administrator does not receive 08 notification of a claim before the date 10 days after the member's death, the person 09 claiming entitlement is not entitled to receive from the division of retirement and 10 benefits any benefit already paid by the administrator. 11 Sec. 39.35.860. Rights under qualified domestic relations order. (a) 12 Notwithstanding the nonalienation provisions in AS 39.35.900(a), the plan 13 administrator may direct that benefits be paid to someone other than a member or 14 beneficiary under a valid qualified domestic relations order that is executed by the 15 judge of a competent court in accordance with applicable state law and that has been 16 accepted by the administrator. 17 (b) The administrator shall determine whether an order meets the requirements 18 of this section within a reasonable period after receiving an order. The administrator 19 shall notify the member and any alternate payee that an order has been received and 20 indicate to the member and any alternate payee when the order is accepted. A separate 21 account for the alternate payee portion shall be established as soon as administratively 22 feasible after the order has been accepted by the administrator. 23 Sec. 39.35.870. Retirement. (a) In order to obtain medical benefits under 24 AS 39.35.880, an active member must retire directly from the plan. A member is 25 eligible to retire from the plan if the member has been an active member for at least 12 26 months before application for retirement and 27 (1) the member has at least 25 years of membership service as a peace 28 officer or fire fighter or at least 30 years of membership service for all other 29 employees; or 30 (2) the member reaches the normal retirement age and has at least 10 31 years of membership service.

01 (b) The normal retirement age is the age set for Medicare eligibility at the time 02 the member retires. 03 (c) A member's surviving spouse is eligible to elect medical benefits under 04 AS 39.35.880 if the member had retired, or was eligible for appointment to retirement 05 at the time of the member's death. 06 (d) Members shall apply for appointment to retirement on the forms and in the 07 manner prescribed by the administrator. 08 (e) Election of the retiree major medical insurance plan is not required in order 09 to elect participation in the health reimbursement arrangement. 10 (f) A person eligible to elect medical benefits is not required to participate in 11 the health reimbursement arrangement in order to elect participation in the retiree 12 major medical insurance plan. 13 (g) An eligible person must make the irrevocable election to participate or not 14 participate in the retiree major medical insurance plan by reaching 70 1/2 years of age, 15 or upon termination of the member's employment, whichever is later. 16 Sec. 39.35.880. Medical benefits. (a) The medical benefits available to 17 eligible persons are access to the retiree major medical insurance plan and to the 18 health reimbursement arrangement under AS 39.30.300. Access to the retiree major 19 medical insurance plan means that an eligible person may not be denied insurance 20 coverage except for failure to pay the required premium. 21 (b) Retiree major medical insurance plan coverage elected by an eligible 22 member under this section covers the eligible member, the spouse of the eligible 23 member, and the dependent children of the eligible member. 24 (c) Retiree major medical insurance plan coverage elected by a surviving 25 spouse of an eligible member under this section covers the surviving spouse and the 26 dependent children of the eligible member who are dependent on the surviving spouse. 27 (d) Major medical insurance coverage takes effect on the first day of the 28 month following the date of the administrator's approval of the election and stops 29 when the person who elects coverage dies or fails to make a required premium 30 payment. 31 (e) The coverage for persons 65 years of age or older is the same as that

01 available for persons under 65 years of age. The benefits payable to those persons 65 02 years of age or older supplement any benefits provided under the federal old age, 03 survivors and disability insurance program. 04 (f) The medical and optional insurance premiums owed by the person who 05 elects coverage may be deducted from the health reimbursement arrangement. If the 06 amount of the health reimbursement arrangement becomes insufficient to pay the 07 premiums, the person who elects coverage under (a) of this section shall pay the 08 premiums directly. 09 (g) The cost of premiums for retiree major medical insurance coverage for an 10 eligible member or surviving spouse who is 11 (1) not eligible for Medicare is an amount equal to the full monthly 12 group premiums for retiree major medical insurance coverage; 13 (2) eligible for Medicare is the following percentage of the premium 14 amounts established for retirees who are eligible for Medicare: 15 (A) 30 percent if the member had 10 or more, but less than 15, 16 years of service; 17 (B) 25 percent if the member had 15 or more, but less than 20, 18 years of service; 19 (C) 20 percent if the member had 20 or more, but less than 25, 20 years of service; 21 (D) 15 percent if the member had 25 or more, but less than 30, 22 years of service; 23 (E) 10 percent if the member had 30 or more years of service. 24 (h) The eligibility for retiree major medical insurance coverage for an 25 alternate payee under a qualified domestic relations order shall be determined based 26 on the eligibility of the member to elect coverage. The alternate payee shall pay the 27 full monthly premium for retiree major medical insurance coverage. 28 (i) A person who is entitled to retiree major medical insurance coverage shall 29 (1) be informed by the administrator in writing 30 (A) that the health insurance coverage available to retired 31 members may be different from the health insurance coverage provided to

01 employees; 02 (B) of time limits for selecting optional health insurance 03 coverage and whether the election is irrevocable; and 04 (2) indicate in writing on a form provided by the administrator that the 05 person has received the information required by this subsection and whether the 06 person has chosen to receive optional health insurance coverage. 07 (j) The monthly group premiums for retiree major medical insurance coverage 08 are established by the administrator in accordance with AS 39.30.095. Nothing in 09 AS 39.35.700 - 39.35.990 guarantees a person who elects coverage under (a) of this 10 section a monthly group premium rate for retiree major medical insurance coverage 11 other than the premium in effect for the month in which the premium is due for 12 coverage for that month. 13 (k) In this section, "health reimbursement arrangement" means the plan 14 established in AS 39.30.300. 15 Sec. 39.35.890. Occupational disability benefits and reemployment of 16 disabled employees. (a) An employee is eligible for an occupational disability 17 benefit if employment is terminated because of a total and apparently permanent 18 occupational disability before the employee's normal retirement date. 19 (b) The occupational disability benefits accrue beginning the first day of the 20 month following termination of employment as a result of the disability and are 21 payable the last day of the month. If a final determination granting the benefit is not 22 made in time to pay the benefit when due, a retroactive payment shall be made to 23 cover the period of deferment. The last payment shall be for the first month in which 24 the disabled employee 25 (1) dies; 26 (2) recovers from the disability; 27 (3) fails to meet the requirements under (f) or (j) of this section; or 28 (4) reaches normal retirement age. 29 (c) If the disabled employee becomes ineligible to receive occupational 30 disability benefits before the normal retirement date, the disabled employee shall then 31 be entitled to receive retirement benefits if the employee would have been eligible for

01 the benefit had employment continued during the period of disability. The period of 02 disability constitutes membership service in regard to determining eligibility for 03 retirement. 04 (d) The monthly amount of an occupational disability benefit is 40 percent of 05 the disabled employee's gross monthly compensation at the time of termination due to 06 disability. While an employee is receiving disability benefits, based on the disabled 07 employee's gross monthly compensation at the time of termination due to disability, 08 the employer shall make contributions 09 (1) to the employee's individual account under AS 39.35.730 on behalf 10 of the employee, without deduction from the employee's disability payments; and 11 (2) on behalf of the employee under AS 39.35.750. 12 (e) An employee is not entitled to an occupational disability benefit unless the 13 employee files an application for an occupational disability benefit with the 14 administrator within 90 days after the date of terminating employment. If the 15 employee is unable to meet a filing requirement of this subsection, the filing 16 requirement may be waived by the administrator if there are extraordinary 17 circumstances that resulted in the employee's inability to meet the filing requirement. 18 (f) A disabled employee receiving an occupational disability benefit shall 19 undergo a medical examination as often as the administrator considers advisable, but 20 not more frequently than once each year. The administrator shall determine the place 21 of the examination and engage the physician or physicians. If, in the judgment of the 22 administrator, the examination indicates that the retired employee is no longer 23 incapacitated because of a total and apparently permanent occupational disability, the 24 administrator may not issue further disability benefits to the employee. 25 (g) A disabled employee's occupational disability benefit terminates when the 26 disabled employee first attains eligibility for normal retirement. At that time, the 27 employee's retirement benefit shall be determined under the provisions of 28 AS 39.35.840 and 39.35.870. An employee receiving disability benefits up until 29 eligibility for retirement shall be considered to have retired directly from the plan. 30 (h) Notwithstanding (g) of this section, at the time a peace officer or fire 31 fighter receiving occupational disability benefits under this section first attains

01 eligibility for normal retirement, the employee shall irrevocably elect to receive 02 retirement benefits in the amount calculated as the 03 (1) monthly occupational disability benefit calculated under (d) of this 04 section; or 05 (2) employee's retirement benefit calculated under the provisions of 06 AS 39.35.370(c). 07 (i) Notwithstanding (b)(3) of this section, a peace officer or fire fighter who 08 retires under (h) of this section is not subject to the requirements of (f) or (j) of this 09 section during retirement. 10 (j) An employee appointed to disability benefits shall apply to the division of 11 vocational rehabilitation within 30 days after the date disability benefits commence. 12 The employee shall be enrolled in a rehabilitation program if the employee meets the 13 eligibility requirements of the division of vocational rehabilitation. Unless the 14 employee demonstrates cause, benefits shall terminate at the end of the first month in 15 which a disabled employee 16 (1) fails to report to the division of vocational rehabilitation; 17 (2) is certified by the division of vocational rehabilitation as failing to 18 cooperate in a vocational rehabilitation program; 19 (3) fails to interview for a job; or 20 (4) fails to accept a position offered. 21 (k) Upon the death of a disabled employee who is receiving or is entitled to 22 receive an occupational disability benefit, the administrator shall pay the surviving 23 spouse a surviving spouse's pension, equal to 40 percent of the employee's monthly 24 compensation at the termination of employment because of occupational disability. If 25 there is no surviving spouse, the administrator shall pay the survivor's pension in equal 26 parts to the dependent children of the employee. The first payment of the surviving 27 spouse's pension or of a dependent child's pension shall accrue from the first day of 28 the month following the employee's death and is payable the last day of the month. 29 The last payment shall be made for the last month in which there is an eligible 30 surviving spouse or child. On the date the normal retirement of the employee would 31 have occurred if the employee had lived, the retirement benefit shall be determined

01 under the provisions of AS 39.35.840 and 39.35.870. An employee who died while 02 receiving disability benefits shall be considered to have retired directly from the plan 03 on the date the normal retirement of the employee would have occurred if the 04 employee had lived. 05 (l) In this section, "occupational disability" has the meaning given in 06 AS 39.35.680. 07 Sec. 39.35.892. Occupational death benefit. (a) If (1) the death of an 08 employee occurs before the employee's retirement and before the employee's normal 09 retirement date, (2) the proximate cause of death is a bodily injury sustained or a 10 hazard undergone while in the performance and within the scope of the employee's 11 duties, and (3) the injury or hazard is not the proximate result of wilful negligence of 12 the employee, a monthly survivor's pension shall be paid to the surviving spouse. If 13 there is no surviving spouse or if the spouse later dies, the monthly survivor's pension 14 shall be paid in equal parts to the dependent children of the employee. 15 (b) The first payment of the surviving spouse's pension or of a dependent 16 child's pension shall be made for the month following the month in which the 17 employee dies, and payment shall cease to be made beginning with the month in 18 which the employee would have first qualified for retirement. 19 (c) The monthly survivor's pension in (b) of this section for survivors of 20 employees who were not peace officers or fire fighters is 40 percent of the employee's 21 monthly compensation in the month in which the employee dies. The monthly 22 survivor's pension in (b) of this section for survivors of employees who were peace 23 officers or fire fighters is 50 percent of the monthly compensation in the month in 24 which the employee dies. While the monthly survivor's pension is being paid, the 25 employer shall make contributions on behalf of the employee's beneficiaries based on 26 the deceased employee's gross monthly compensation at the time of occupational 27 death 28 (1) to the employee's individual account under AS 39.35.730, without 29 deduction from the survivor's pension; and 30 (2) to the appropriate accounts and funds under AS 39.35.750. 31 (d) If an employee's death is caused by an act of assault, assassination, or

01 terrorism directly related to the person's status as an employee, whether the act occurs 02 on or off the employee's job site, the death shall be considered to have occurred in the 03 performance of and within the scope of the employee's duties for purposes of (a)(2) of 04 this section. If the expressed or apparent motive and intent of the perpetrator of the 05 harm inflicted upon the employee was due to the performance of the employee's job 06 duties or employment, the death shall be considered to be directly related to the 07 employee's status as an employee. An employee's job duties are those performed 08 within the course and scope of the person's employment with an employer. 09 (e) On the date the normal retirement of the employee would have occurred if 10 the employee had lived, the retirement benefit shall be determined under the 11 provisions of AS 39.35.840 and 39.35.870. An employee who died and whose 12 survivors receive occupational death benefits under this section shall be considered to 13 have retired directly from the plan on the date the normal retirement of the employee 14 would have occurred if the employee had lived. 15 Sec. 39.35.895. Amendment and termination of plan. (a) The state has the 16 right to amend the plan at any time and from time to time, in whole or in part, 17 including the right to make retroactive amendments referred to in 26 U.S.C. 401(b). 18 (b) The plan administrator may not modify or amend the plan retroactively in 19 such a manner as to reduce the benefits of any member accrued to date under the plan 20 by reason of contributions made before the modification or amendment except to the 21 extent that the reduction is permitted by the Internal Revenue Code. 22 (c) The state may, in its discretion, terminate the plan in whole or part at any 23 time without liability for the termination. If the plan is terminated, all investments 24 remain in force until all individual accounts have been completely distributed under 25 the plan, and, after all plan liabilities are satisfied, excess assets revert to the employer. 26 (d) Any contribution made by an employer to the plan because of a mistake of 27 fact must be returned to the employer by the administrator within one year after the 28 contribution or discovery, whichever is later. 29 Sec. 39.35.900. Exclusive benefit. (a) The corpus or income of the assets 30 held in trust as required by the plan may not be diverted or used for other than the 31 exclusive benefit of the participants.

01 (b) If plan benefits are provided through the distribution of annuity or 02 insurance contracts, any refunds or credits in excess of plan benefits due to dividends, 03 earnings, or other experience rating credits, or surrender or cancellation credits, shall 04 be paid to the trust fund. 05 (c) The assets of the plan may not be used to pay premiums or contributions of 06 the employer under another plan maintained by the employer. 07 Sec. 39.35.910. Nonguarantee of returns, rates, or benefit amounts. The 08 plan created by AS 39.35.700 - 39.35.990 is a defined contribution plan, not a defined 09 benefit plan. The amount of money in the account of a participant depends on the 10 amount of contributions and the rate of return from investments of the account that 11 varies over time. If benefits are paid in the form of an annuity, the benefit amount 12 payable is dependent on the amount of money in the account and the interest rates 13 applied and service fees charged by the annuity payor at the time benefits are first 14 paid. Nothing in this plan guarantees a participant 15 (1) a rate of return or interest rate other than that actually earned by the 16 account of the participant, less applicable administrative expenses; or 17 (2) an annuity based on interest rates or service charges other than 18 interest rates available from and service charges by the annuity payor in effect at the 19 time the annuity is paid. 20 Sec. 39.35.920. Nonguarantee of employment. The provisions of 21 AS 39.35.700 - 39.35.990 are not a contract of employment between an employer and 22 an employee, nor do they confer a right of an employee to be continued in the 23 employment of an employer, nor are they a limitation of the right of an employer to 24 discharge an employee with or without cause. 25 Sec. 39.35.930. Fraud. (a) A person who knowingly makes a false statement 26 or falsifies or permits to be falsified a record of this plan in an attempt to defraud the 27 plan is guilty of a class A misdemeanor. 28 (b) In this section, "knowingly" has the meaning given in AS 11.81.900(a). 29 Sec. 39.35.940. Transfer into defined contribution plan by nonvested 30 members of defined benefit plan. (a) Subject to (i) of this section, an active 31 member of the defined benefit retirement plan of the public employees' retirement

01 system is eligible to participate in the defined contribution retirement plan established 02 under AS 39.35.700 - 39.35.990, if that member has not vested. Participation in the 03 defined contribution retirement plan is in lieu of participation in the defined benefit 04 retirement plan established under AS 39.35.095 - 39.35.680. 05 (b) A member who has vested in a defined benefit retirement plan is not 06 eligible to transfer under this section. 07 (c) Each eligible member who elects to participate in the defined contribution 08 retirement plan shall have transferred to a new account the present value of the 09 member contribution account balance held in trust for the member under the defined 10 benefit retirement plan of the public employees' retirement system. A matching 11 employer contribution shall be made on behalf of that employee to the new account. 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 eligibility to elect medical benefits under AS 39.35.870. Membership service allowed 16 for credit toward medical benefits does not include any service credit purchased for 17 employment by an employer who is not a participating employer in this chapter. 18 (e) An eligible member whose accounts are subject to a qualified domestic 19 relations order may not make an election to participate in the defined contribution 20 retirement plan under this subsection unless the qualified domestic relations order is 21 amended or vacated and court-certified copies of the order are received by the 22 administrator. 23 (f) As directed by the participant, the board shall transfer or cause to be 24 transferred the appropriate amounts to the designated account. The board shall 25 establish transfer procedures by regulation, but the actual transfer may not be later 26 than 30 days after the effective date of the member's participation in the defined 27 contribution retirement plan unless the major financial markets for securities available 28 for a transfer are seriously disrupted by an unforeseen event that also causes the 29 suspension of trading on any national securities exchange in the country where the 30 securities were issued. In that event, the 30-day period of time may be extended by a 31 resolution of the board of trustees. Transfers are not commissionable or subject to

01 other fees and may be in the form of securities or cash as determined by the board. 02 Securities shall be valued as of the date of receipt in the participant's account. 03 (g) If the board or the administrator receives notification from the United 04 States Department of the Treasury, Internal Revenue Service, that this section or a 05 portion of this section will cause the retirement system under this chapter, or a portion 06 of the retirement system under this chapter, to be disqualified for tax purposes under 07 the Internal Revenue Code, the portion that will cause the disqualification does not 08 apply, and the board and the administrator shall notify the presiding officers of the 09 legislature. 10 (h) The election to participate in the defined contribution retirement plan must 11 be made in writing on forms and in the manner prescribed by the administrator. 12 Before accepting an election to participate in the defined contribution retirement plan, 13 the administrator must provide the employee planning on making an election to 14 participate in the defined contribution retirement plan with information, including 15 calculations to illustrate the effect of moving the employee's retirement plan from the 16 defined benefit retirement plan to the defined contribution retirement plan as well as 17 other information to clearly inform the employee of the potential consequences of the 18 employee's election. An election made under this subsection to participate in the 19 defined contribution retirement plan is irrevocable. Upon making the election, the 20 participant shall be enrolled as a member of the defined contribution retirement plan, 21 the member's participation in the plan shall be governed by the provisions of 22 AS 39.35.700 - 39.35.990, and the member's participation in the defined benefit 23 retirement plan under AS 39.35.115 shall terminate. The participant's enrollment in 24 the defined contribution retirement plan shall be effective the first day of the month 25 after the administrator receives the completed enrollment forms. An election made by 26 an eligible member who is married is not effective unless the election is signed by the 27 individual's spouse. 28 (i) A member may make an election under this section only if the member's 29 employer participates in both the defined benefits retirement plan and the defined 30 contribution retirement plan and consents to transfers under this section. The 31 employer shall notify the administrator if the employer consents to allowing the

01 employer's members to choose to transfer from the defined benefits retirement plan to 02 the defined contribution retirement plan under this section. An employer's notice to 03 allow transfers is irrevocable and applicable to all eligible employees of the employer. 04 (j) In this section, 05 (1) "defined benefit retirement plan" means the retirement plan 06 established in AS 39.35.095 - 39.35.680; 07 (2) "defined contribution retirement plan" means the retirement plan 08 established in AS 39.35.700 - 39.35.990. 09 Sec. 39.35.950. Request by political subdivision to participate and 10 adoption of resolution. A municipality or other political subdivision of the state may 11 request to become an employer in this plan. The request shall be made after adoption 12 of a resolution by the legislative body of the political subdivision and after approval of 13 the resolution by the person required by law to approve the resolution. A certified 14 copy of the resolution shall be filed with the administrator. If the administrator 15 approves the request for participation, the political subdivision is an employer of the 16 plan. 17 Sec. 39.35.955. Request by public organization to participate and 18 adoption of resolution. A public organization may request to become an employer in 19 this plan. The request shall be made after adoption of a resolution by the governing 20 body of the public organization. A certified copy of the resolution shall be filed with 21 the administrator. If the administrator approves the request for participation, the 22 public organization is an employer of the plan. 23 Sec. 39.35.960. Membership in teachers' and public employees' 24 retirement systems. A person who is employed at least half-time in the public 25 employees' defined contribution retirement plan (AS 39.35.700 - 39.35.990) during the 26 same period that the person is employed at least half-time in a position in the teachers' 27 defined contribution retirement plan (AS 14.25.310 - 14.25.590) shall receive credited 28 service under each plan for half-time employment. However, the amount of credited 29 service a person receives under the public employees' defined contribution retirement 30 plan during a school year may not exceed the amount necessary, when added to the 31 amount of credited service earned during the school year under the teachers' defined

01 contribution retirement plan, to equal one year of credited service. 02 Sec. 39.35.965. Army and air national guard employees. A regular full- 03 time civilian employee of the Alaska Army National Guard and Air National Guard 04 whose entire salary is paid from allotted federal funds is included in the public 05 employees' defined contribution retirement plan (AS 39.35.700 - 39.35.990) if the 06 federal or state government pays the employer's contributions. If the amount that the 07 federal government may legally contribute to the plan is lower than the required 08 employer's contribution, the state government shall contribute the difference. If the 09 employer's contributions are not paid when due, service credit for the period of 10 delinquency may not be granted until the contributions are paid. 11 Sec. 39.35.970. North Pacific Fishery Management Council employees. 12 An employee of the North Pacific Fishery Management Council appointed under 16 13 U.S.C. 1852(f)(1) (Sec. 302(f)(1) of P.L. 94-265) whose compensation is paid from 14 allotted federal funds is included in the public employees' defined contribution 15 retirement plan (AS 39.35.700 - 39.35.990) if the council pays the employer's 16 contributions. If the employer's contributions are not paid when due, credited service 17 for the period of delinquency may not be granted until the contributions are paid. 18 Sec. 39.35.990. Definitions. In AS 39.35.700 - 39.35.990, unless the context 19 requires otherwise, 20 (1) "administrator" means the commissioner of administration or the 21 commissioner's designee; 22 (2) "alternate payee" means the person for whom an amount has been 23 separated into an account under a qualified domestic relations order; 24 (3) "annuitant" means a member, beneficiary, or alternate payee who is 25 receiving a benefit under this plan; 26 (4) "beneficiary" means the person or persons entitled under the 27 provisions of this plan to receive benefits after the death of a member or alternate 28 payee; 29 (5) "board" has the meaning given in AS 39.35.680; 30 (6) "calendar year" has the meaning given in AS 39.35.680; 31 (7) "compensation"

01 (A) means 02 (i) the total remuneration earned by an employee for 03 personal services rendered, including cost-of-living differentials, as 04 reported on the employee's Federal Income Tax Withholding Statement 05 (Form W-2) from the employer for the calendar year; 06 (ii) the member contribution to the public employees' 07 retirement system under AS 39.35.730, employee deferrals under 08 AS 39.45.010, the wage reduction amount contributed to the Alaska 09 Supplemental Annuity Plan under AS 39.30.150(a), and the wage 10 reduction amount contributed to the Alaska Supplemental Benefit Plan 11 under AS 39.30.150(c), as those statutes may be amended from time to 12 time; 13 (B) does not include retirement benefits, severance pay or other 14 separation bonuses, welfare benefits, per diem, expense allowances, workers' 15 compensation payments, payments for leave not used whether those leave 16 payments are scheduled payments, lump-sum payments, donations, or cash-ins, 17 any remuneration contributed by the employer for or on account of the 18 employee under this plan or under any other qualified or nonqualified 19 employee benefit plan, any remuneration not specifically included above 20 which would have been excluded under 26 U.S.C. 3121(a) (Internal Revenue 21 Code) if the employer had remained in the Federal Social Security System, or 22 any remuneration paid by the employer in excess of the Social Security 23 Taxable Wage Base for the calendar year; 24 (C) notwithstanding (B) of this paragraph, includes any amount 25 that is contributed by the employer under a salary reduction agreement and that 26 is not includible in the gross income of the employee under 26 U.S.C. 125, 27 132(f)(4), 402(e)(3), 402(h)(1)(B) or 403(b) (Internal Revenue Code); the 28 annual compensation limitation for the member, which is so taken into account 29 for those purposes, may not exceed $200,000, as adjusted for the cost of living 30 in accordance with 26 U.S.C. 401(a)(17)(B) (Internal Revenue Code), with the 31 limitation for a fiscal year being the limitation in effect for the calendar year

01 within which the fiscal year begins; 02 (8) "dependent child" has the meaning given in AS 39.35.680; 03 (9) "distribution commencement date" has the meaning given in 04 AS 39.35.840(a); 05 (10) "employer" means 06 (A) the State of Alaska; or 07 (B) a political subdivision or public organization of the state 08 that participates in the plan; 09 (11) "fund" means the assets of the plan; 10 (12) "individual account" means the total maintained by the plan in an 11 investment account within the trust fund, established for each member for the purposes 12 of allocation of the member's contributions, the employer's contributions on behalf of 13 the member, and earnings credited to each of those contributions, investment gains 14 and losses, and expenses; as well as reporting of the member's benefit under the plan; 15 (13) "Internal Revenue Code" means the Internal Revenue Code of 16 1986, as amended; 17 (14) "investment funds" means those separate funds that are provided 18 within and that make up the trust fund and that are established for the purpose of 19 directing investment through the exercise of the sole control of a member, beneficiary, 20 or alternate payee under the terms of the plan and trust agreement; 21 (15) "limitation year" means the year for which contributions are made 22 to a member's individual account as reported to the Internal Revenue Service and as 23 meets the limits described in 26 U.S.C. 415(c); 24 (16) "member" means an employee of an employer or former 25 employee of an employer who retains a right to benefits under the plan, but does not 26 include full-time or part-time instructors of the Department of Labor and Workforce 27 Development who have a teaching certificate, regardless of whether the position as 28 instructor requires a teaching certificate as a condition of employment and who have 29 earlier credited service under AS 14.25.310 - 14.25.590; 30 (17) "membership service" means full-time or part-time employment 31 with an employer in the plan;

01 (18) "normal retirement age" means the age set for Medicare eligibility 02 at the time the member retires; 03 (19) "participant" means the person who has a vested right to an 04 individual account, such as a member, an alternate payee if the account is subject to a 05 qualified domestic relations order, the member's beneficiary if the member is 06 deceased, or an alternate payee's beneficiary if the alternate payee is deceased; 07 (20) "peace officer" or "fire fighter" has the meaning given in 08 AS 39.35.680; 09 (21) "plan" means the retirement plan established in AS 39.35.700 - 10 39.35.990; 11 (22) "prudent investment standard" means the degree of care, skill, 12 prudence, and diligence under the circumstances then prevailing that a prudent person 13 acting in a like capacity and familiar with such matters would use in the conduct of an 14 enterprise of a like character and with like aims; 15 (23) "qualified domestic relations order" means a divorce or 16 dissolution judgment under AS 25.24, including an order approving a property 17 settlement, that 18 (A) creates or recognizes the existence of an alternate payee's 19 right to, or assigns to an alternate payee the right to, receive all or a portion of 20 an individual account or the benefits payable with respect to a member; 21 (B) sets out the name and last known mailing address, if any, of 22 the member and of each alternate payee covered by the order; 23 (C) sets out the amount or percentage of the member's benefit, 24 or of any survivor's benefit, to be paid to the alternate payee, or sets out the 25 manner in which that amount or percentage is to be determined; 26 (D) sets out the number of payments or period to which the 27 order applies; 28 (E) sets out the retirement plan to which the order applies; 29 (F) does not require any type or form of benefit or any option 30 not otherwise provided by AS 39.35.700 - 39.35.990; 31 (G) does not require an increase of benefits in excess of the

01 amount provided by AS 39.35.700 - 39.35.990; and 02 (H) does not require the payment to an alternate payee of 03 benefits that are required to be paid to another alternate payee under another 04 order previously determined to be a qualified domestic relations order; 05 (24) "retiree" means an eligible person who has elected to receive 06 medical benefits under AS 39.35.880; 07 (25) "surviving spouse" means the spouse of an employee who has 08 been married to the employee for at least one year at the time of the employee's death; 09 (26) "system" has the meaning given in AS 39.35.680; 10 (27) "year of service" means the equivalent of 52 weeks of permanent 11 full-time employment, which may consist of a combination of permanent full-time or 12 permanent part-time membership service; in this paragraph, "permanent full-time" and 13 "permanent part-time" have the meanings given in AS 39.35.680. 14 * Sec. 127. AS 39.45.030(a) is amended to read: 15 (a) The Alaska Retirement Management [STATE PENSION 16 INVESTMENT] Board is authorized, subject to contracts with individual employees, 17 to invest the funds held under a deferred compensation program. The board has the 18 same powers and duties concerning the management and investment in regard to those 19 funds as are provided under AS 37.10.220 [AS 14.25.180]. 20 * Sec. 128. AS 39.45.030(g) is amended to read: 21 (g) In this section, "board" means the Alaska Retirement Management 22 [STATE PENSION INVESTMENT] Board. 23 * Sec. 129. AS 39.45.060 is amended by adding a new paragraph to read: 24 (2) "board" means the trustees of the Alaska Retirement Management 25 Board established under AS 37.10.210. 26 * Sec. 130. AS 39.50.200(a)(9) is amended to read: 27 (9) "public official" means 28 (A) a judicial officer; 29 (B) the governor or the lieutenant governor; 30 (C) a person hired or appointed in a department in the 31 executive branch as

01 (i) the head or deputy head of the department; 02 (ii) the director or deputy director of a division; 03 (iii) a special assistant to the head of the department; 04 (iv) a person serving as the legislative liaison for the 05 department; 06 (D) an assistant to the governor or the lieutenant governor; 07 (E) the chair or a member of a state commission or board 08 [OTHER THAN PHYSICIAN MEMBERS OR ALTERNATES OF THE 09 ALASKA TEACHERS' RETIREMENT BOARD APPOINTED UNDER 10 AS 14.25.035(a)(2) OR OF THE PUBLIC EMPLOYEES' RETIREMENT 11 BOARD APPOINTED UNDER AS 39.35.030(d);] 12 (F) state investment officers and the state comptroller in the 13 Department of Revenue; 14 (G) [REPEALED 15 (H)] the chief procurement officer appointed under 16 AS 36.30.010; 17 (H) [(I)] the executive director of the Alaska Workforce 18 Investment Board; and 19 (I) [(J)] each appointed or elected municipal officer; 20 * Sec. 131. AS 39.50.200(b)(54) is amended to read: 21 (54) Alaska Retirement Management [STATE PENSION 22 INVESTMENT] Board (AS 37.10.210); 23 * Sec. 132. AS 44.25.020(2) is amended to read: 24 (2) collect, account for, have custody of, invest, and manage all state 25 funds and all revenues of the state except revenues incidental to a program of licensing 26 and regulation carried on by another state department, funds managed and invested by 27 the Alaska Retirement Management [STATE PENSION INVESTMENT] Board, 28 and as otherwise provided by law; 29 * Sec. 133. AS 44.25.028(a) is amended to read: 30 (a) The commissioner of revenue may designate employees of the Department 31 of Revenue who are subject to the provisions of AS 39.50 because of their

01 responsibility for participating in the management or investment of the funds for 02 which the Alaska Retirement Management [STATE PENSION INVESTMENT] 03 Board is responsible. 04 * Sec. 134. AS 44.25.028(b) is amended to read: 05 (b) If an officer or employee of the Department of Revenue with responsibility 06 for funds for which the Alaska Retirement Management [STATE PENSION 07 INVESTMENT] Board is responsible acquires, owns, or controls an interest, direct or 08 indirect, in an entity or project in which assets under the control of the board are 09 invested, the officer or employee shall immediately disclose the interest to the board. 10 The disclosure is a matter of public record and shall be included in the minutes of the 11 board meeting next following the disclosure. The commissioner shall adopt 12 regulations to restrict officers and employees of the department from having a 13 substantial interest in an entity or project in which assets under the control of the board 14 are invested. 15 * Sec. 135. AS 44.64.030(a) is amended by adding new paragraphs to read: 16 (36) AS 14.25.006 (teachers' retirement system); 17 (37) AS 39.35.006 (public employees' retirement system). 18 * Sec. 136. AS 14.25.012(a), 14.25.015, 14.25.020, 14.25.022, 14.25.030, 14.25.035, 19 14.25.037, 14.25.170, 14.25.175(e), 14.25.180, 14.25.190, 14.25.220(41); AS 39.30.175(f); 20 AS 39.35.010, 39.35.020, 39.35.030, 39.35.040, 39.35.042, 39.35.047, 39.35.060, 39.35.080, 21 39.35.090, 39.35.520(c), 39.35.522(c), 39.35.522(e); AS 39.45.025; AS 39.50.200(b)(23), and 22 39.50.200(b)(29) are repealed. 23 * Sec. 137. AS 14.25.061(c), 14.25.062; and AS 39.35.350 are repealed. 24 * Sec. 138. The uncodified law of the State of Alaska is amended by adding a new section 25 to read: 26 EMPLOYER CONTRIBUTIONS FOR OCCUPATIONAL DISABILITY AND 27 DEATH BENEFITS IN THE PUBLIC EMPLOYEES' DEFINED CONTRIBUTION 28 RETIREMENT PLAN FOR THE FIRST FISCAL YEAR THE PLAN IS IN EFFECT. 29 Notwithstanding AS 39.35.750(e), added by sec. 126 of this Act, for the first fiscal year in 30 which the public employees' defined contribution retirement plan is in effect, the employer 31 contribution to fully fund the cost of providing occupational disability and occupational death

01 benefits under AS 39.35.890 and 39.35.892 shall be equal to 02 (1) 0.4 percent of the compensation for peace officers and fire fighters; and 03 (2) 0.3 percent of the compensation for all other employees. 04 * Sec. 139. The uncodified law of the State of Alaska is amended by adding a new section 05 to read: 06 TRANSITION: INITIAL STAGGERED TERMS OF TRUSTEES OF THE 07 ALASKA RETIREMENT MANAGEMENT BOARD. Notwithstanding AS 37.10.210(c), as 08 repealed and reenacted by sec. 62 of this Act, the terms of the initially appointed trustees of 09 the Alaska Retirement Management Board who are not commissioners shall be set by the 10 governor to achieve staggered terms in the manner provided for seven-member boards by 11 AS 39.05.055(5). Notwithstanding AS 39.05.055(5), the terms of each of the two members of 12 the two retirement systems appointed under AS 37.10.210(b)(2)(C) and 37.10.210(b)(2)(D), 13 as repealed and reenacted by sec. 62 of this Act, shall be set so that the term of one of each of 14 the members in each system expires two years apart from the term of the other member 15 representing that system. 16 * Sec. 140. The uncodified law of the State of Alaska is amended by adding a new section 17 to read: 18 TERMS OF MEMBERS OF THE ALASKA TEACHERS' RETIREMENT BOARD 19 AND THE PUBLIC EMPLOYEES' RETIREMENT BOARD. The terms of all board 20 members appointed to the Alaska Teachers' Retirement Board and the Public Employees' 21 Retirement Board expire on the effective date of this section. 22 * Sec. 141. The uncodified law of the State of Alaska is amended by adding a new section 23 to read: 24 TERMS OF MEMBERS OF THE ALASKA STATE PENSION INVESTMENT 25 BOARD. The terms of all board members appointed to the Alaska State Pension Investment 26 Board expire on September 30, 2005. 27 * Sec. 142. The uncodified law of the State of Alaska is amended by adding a new section 28 to read: 29 TRANSITION OF DUTIES BETWEEN THE ALASKA STATE PENSION 30 INVESTMENT BOARD AND THE ALASKA RETIREMENT MANAGEMENT BOARD. 31 (a) After the effective date of this section and until September 30, 2005, the Alaska State

01 Pension Investment Board shall continue to exercise the powers and duties assigned in this 02 Act to the Alaska Retirement Management Board. The Alaska State Pension Investment 03 Board shall take actions to facilitate the transition of duties formerly assigned to the Alaska 04 State Pension Investment Board to the duties assigned in this Act to the Alaska Retirement 05 Management Board. A member of the Alaska Retirement Management Board appointed to 06 serve as a trustee before September 30, 2005, shall be invited to observe and train with the 07 Alaska State Pension Investment Board. 08 (b) The Alaska Retirement Management Board may not assume the duties and 09 responsibilities assigned to the Alaska Retirement Management Board in this Act until 10 October 1, 2005. 11 * Sec. 143. The uncodified law of the State of Alaska is amended by adding a new section 12 to read: 13 TRANSITION. Hearings and other proceedings pending under a law amended or 14 repealed by this Act or in connection with functions transferred by this Act continue in effect 15 and may be continued and completed notwithstanding a transfer or amendment or repeal 16 provided for in this Act. Orders and regulations issued or adopted under authority of a law 17 amended or repealed by this Act remain in effect for the term issued, or until revoked, 18 vacated, or otherwise modified under the provisions of this Act. Contracts, rights, liabilities, 19 and obligations created by or under a law amended or repealed by this Act, and in effect on 20 the effective date of this section, remain in effect notwithstanding this Act's taking effect. 21 Records, equipment, appropriations, funds, and other property of boards or agencies of the 22 state whose functions are transferred under this Act shall be transferred to implement the 23 provisions of this Act. 24 * Sec. 144. The uncodified law of the State of Alaska is amended by adding a new section 25 to read: 26 TRANSITION: REGULATIONS. (a) The Department of Administration and the 27 Department of Revenue may proceed to develop and adopt regulations required to implement 28 this Act. 29 (b) Regulations adopted by the Department of Administration and the Department of 30 Revenue under this Act relate to the internal management of a state agency, and the adoption 31 of the regulations is not subject to AS 44.62 (Administrative Procedure Act).

01 * Sec. 145. The uncodified law of the State of Alaska is amended by adding a new section 02 to read: 03 REPORT TO THE LEGISLATURE BY ALASKA RETIREMENT MANAGEMENT 04 BOARD. It is the intent of the legislature that there will be a moratorium after the effective 05 date of this Act on legislation affecting all public employees' retirement plans until the Alaska 06 Retirement Management Board can present a report to the legislature containing the board's 07 assessment and recommendations as provided in this section. The Alaska Retirement 08 Management Board shall report to the legislature 120 days after all members are appointed to 09 the board, or 15 days after the first day of the first regular legislative session following the 10 effective date of this section, whichever is first. The report must include the board's 11 (1) preliminary assessment of the financial health of all public employees' 12 retirement plans and all teachers' retirement plans; 13 (2) assessment of the actuarial services purchased by the board; 14 (3) recommendations for additional legislative or administrative policy to 15 improve the financial health of the retirement plans; 16 (4) short-term and long-term recommendations for addressing the unfunded 17 liability of the retirement plans; and 18 (5) recommendations for legislative procedures regarding fiscal notes for new 19 legislation affecting the retirement plans. 20 * Sec. 146. The uncodified law of the State of Alaska is amended by adding a new section 21 to read: 22 REPORT TO THE LEGISLATURE ON HEALTH CARE COST-SAVING 23 MEASURES. The Department of Administration shall provide an annual report to the 24 legislature regarding the cost-saving measures it has implemented by regulation as described 25 in AS 39.30.090(c), enacted by sec. 74 of this Act. 26 * Sec. 147. The uncodified law of the State of Alaska is amended by adding a new section 27 to read: 28 INSTRUCTION REGARDING ALASKA TEACHERS' RETIREMENT SYSTEM 29 BOARD, ALASKA PUBLIC EMPLOYEES' RETIREMENT SYSTEM BOARD, AND 30 ALASKA STATE PENSION INVESTMENT BOARD. Wherever in the Alaska Statutes and 31 the Alaska Administrative Code the terms "Alaska Teachers' Retirement System Board,"

01 "Alaska Public Employees' Retirement System Board," or "Alaska State Pension Investment 02 Board" are used, they shall be read as "Alaska Retirement Management Board" when to do so 03 would be consistent with the changes made by this Act. 04 * Sec. 148. The uncodified law of the State of Alaska is amended by adding a new section 05 to read: 06 SPECIFIC INSTRUCTIONS TO REVISOR OF STATUTES CONCERNING 07 SPECIFIC REFERENCES. (a) The revisor of statutes shall change references to "this 08 chapter" to "AS 14.25.009 - 14.25.220" in the following statutes: AS 14.25.040(b), 09 14.25.040(c), 14.25.045(a), 14.25.047, 14.25.061(a), 14.25.062, 14.25.063(a), 14.25.075(c), 10 14.25.105, 14.25.107, 14.25.110(k), 14.25.142, 14.25.150(b), 14.25.153, 14.25.160(h), 11 14.25.165(f), 14.25.166, 14.25.177, 14.25.195, 14.25.200(b), 14.25.205, and 14.25.210, and 12 in 14.25.220 in each place that the phrase appears. 13 (b) The revisor of statutes shall change the reference to "board" to "administrator" in 14 the following statutes: AS 14.25.075 and 14.25.130(f). 15 (c) The revisor of statutes shall change the reference to "system" to "plan" in the 16 following statutes: AS 14.25.040(b), 14.25.040(c), 14.25.045, 14.25.047, 14.25.050(a), 17 14.25.055, 14.25.060, 14.25.061(a), 14.25.062, 14.25.063(a), 14.25.065, 14.25.070, 18 14.25.075(c), 14.25.075(d), 14.25.075(g), 14.25.075(h), 14.25.075(i), 14.25.100(a), 19 14.25.105(c), 14.25.107, 14.25.110, 14.25.125(c), 14.25.143, 14.25.163, 14.25.165(i), 20 14.25.167(g), 14.25.168, 14.25.169, 14.25.173(a), 14.25.173(d), 14.25.181, 14.25.200, 21 14.25.210, 14.25.220(1), 14.25.220(4), 14.25.220(7), 14.25.220(14), 14.25.220(20), 22 14.25.220(22), 14.25.220(23), 14.25.220(31), 14.25.220(34), 14.25.220(36), 14.25.220(37), 23 14.25.220(42); AS 39.35.011; AS 39.35.120, 39.35.125, 39.35.160, 39.35.165(a), 24 39.35.165(c), 39.35.165(d), 39.35.165(e), 39.35.165(g), 39.35.165(h), 39.35.165(i), 25 39.35.170, 39.35.180, 39.35.195(b), 39.35.195(c), 39.35.250, 39.35.280, 39.35.300(c), 26 39.35.310(a), 39.35.310(c), 39.35.340(a), 39.35.342(a), 39.35.342(d), 39.35.345(a), 27 39.35.345(d), 39.35.360(a), 39.35.360(g), 39.35.360(h), 39.35.360(k), 39.35.370(f), 28 39.35.370(h), 39.35.370(i), 39.35.370(j), 39.35.370(k), 39.35.371(i), 39.35.381(b), 29 39.35.381(g), 39.35.385(c), 39.35.400(e), 39.35.450(g), 39.35.475(a), 39.35.475(b), 30 39.35.475(d), 39.35.500(a), 39.35.505, 39.35.520(a), 39.35.520(d), 39.35.522(d), 31 39.35.527(a), 39.35.527(b), 39.35.530, 39.35.535(a), 39.35.535(d), 39.35.550, 39.35.560,

01 39.35.570, 39.35.580, 39.35.590, 39.35.600, 39.35.610, 39.35.620(a), 39.35.620(h), 02 39.35.650, 39.35.670, 39.35.675(a), 39.35.680(1), 39.35.680(5), 39.35.680(9), 39.35.680(12), 03 39.35.680(15), 39.35.680(16), 39.35.680(17), 39.35.680(20), 39.35.680(21)(A), 04 39.35.680(29), 39.35.680(32), 39.35.680(33), and 39.35.680(35). 05 (d) The revisor of statutes shall change the reference to "board" to "commissioner" in 06 the following statutes: AS 39.35.290, 39.35.522(a), 39.35.522(b), and 39.35.522(d). 07 (e) The revisor of statutes shall change references to "this chapter" to "AS 39.35.095 - 08 39.35.680" in the following statutes: AS 39.35.165, 39.35.200, 39.35.250, 39.35.300, 09 39.35.340, 39.35.350, 39.35.360, 39.35.370, 39.35.371, 39.35.375, 39.35.381, 39.35.480, 10 39.35.490, 39.35.495, 39.35.505, 39.35.530, 39.35.546, 39.35.547, 39.35.615(c), 11 39.35.620(e), 39.35.660, 39.35.675(b), 39.35.677, and 39.35.680. 12 (f) The revisor of statutes shall renumber AS 39.35.690 to follow AS 39.35.990. 13 * Sec. 149. The uncodified law of the State of Alaska is amended by adding a new section 14 to read: 15 IMPLEMENTATION OF SECTIONS 147 AND 148 OF THIS ACT. Under 16 AS 01.05.031, the revisor of statutes shall implement secs. 147 and 148 of this Act in the 17 Alaska Statutes, and, under AS 44.62.125(b)(6), the regulations attorney shall implement secs. 18 147 and 148 of this Act in the administrative code. 19 * Sec. 150. The uncodified law of the State of Alaska is amended by adding a new section 20 to read: 21 CONDITIONAL RETROACTIVITY. If secs. 1 - 5, 7 - 9, 12, 15 - 18, 21 - 32, 34 - 22 41, 43 - 49, 51 - 64, 66 - 72, 74 - 84, 86 - 92, 99 - 110, 112 - 116, 118, 119, 121 - 125, 127 - 23 136, and 139 - 148 of this Act take effect after July 1, 2005, secs. 1 - 5, 7 - 9, 12, 15 - 18, 21 - 24 32, 34 - 41, 43 - 49, 51 - 64, 66 - 72, 74 - 84, 86 - 92, 99 - 110, 112 - 116, 118, 119, 121 - 125, 25 127 - 136, and 139 - 148 of this Act are retroactive to July 1, 2005. 26 * Sec. 151. Sections 20 and 120 of this Act take effect January 1, 2006. 27 * Sec. 152. Sections 6, 33, 42, 50, 65, 73, 85, 126, and 138 of this Act take effect July 1, 28 2006. 29 * Sec. 153. Sections 10, 11, 13, 14, 19, 93 - 98, 111, 117, and 137 of this Act take effect 30 June 30, 2010. 31 * Sec. 154. Section 149 of this Act takes effect immediately under AS 01.10.070(c).

01 * Sec. 155. Except as provided in secs. 151 - 154 of this Act, this Act takes effect July 1, 02 2005.