AB331: Bill Text

AB331,1,4 An Act to amend 40.02 (25) (b) 6m. a., 40.02 (49), 40.05 (2) (b) and 40.05 (4) (b); and to create chapter 37, 40.02 (25) (a) 7., 40.02 (25) (b) 12., 40.02 (46m), 40.02 (57g) and 40.22 (2) (m) of the statutes; relating to: creating a University of Wisconsin optional retirement system and granting rule-making authority.

Analysis by the Legislative Reference Bureau

Under current law, all faculty and academic staff who hold positions at the University of Wisconsin (UW) System, like other state employes, participate in the Wisconsin retirement system (WRS). This bill creates a University of Wisconsin optional retirement system (UWORS) for certain faculty and academic staff at the UW System. Under the bill, faculty and academic staff hired after the UWORS is operational may elect to participate in the UWORS in lieu of participating in the WRS. The key features of the UWORS are as follows:

1. The UWORS is created to provide retirement annuities for certain faculty and academic staff who elect to participate in the UWORS. An employe who elects to become a participating employe in the UWORS may not be a participating employe in the WRS.

2. The UWORS is established as a governmental plan and a qualified plan under the Internal Revenue Code.

3. The UWORS is managed and administered by the board of regents of the UW System. Under the bill, the board of regents is required to contract with an insurance company that is authorized to transact insurance business in this state to provide retirement annuities for faculty and academic staff who elect to participate in the UWORS.

4. All faculty and academic staff hired after the UWORS is operational are eligible to participate. Faculty and academic staff initially appointed to positions at the UW System after the UWORS is operational have 60 days from the date of appointment to elect to participate in the UWORS. If an employe who is a member of the faculty or academic staff does not so elect, he or she must participate in the WRS and may not subsequently elect to participate in the UWORS.

5. For all faculty and academic staff who elect to participate in the UWORS, the board of regents must make contributions on their behalf in an amount that equals the employe required and employer required contributions that would be made by the board of regents on behalf of the faculty and academic staff if they were participants in the WRS.

6. Faculty and academic staff covered under the UWORS immediately vest in all contributions made on their behalf. If any member of the faculty or academic staff who participates in the UWORS would subsequently separate from state service and become employed by an employer who is not under the WRS, the faculty or academic staff member would retain the rights to all contributions made on his or her behalf under the UWORS.

7. With respect to contributions to fund the unfunded prior service liability of the UW System under the WRS, the board of regents must make contributions for all faculty and academic staff who elect to participate in the UWORS as though those persons were participating employes in the WRS.

8. For all faculty and academic staff who elect to participate in the UWORS, the bill does not affect their right to receive any group insurance benefits administered by the department of employe trust funds, other than long-term disability insurance, or to participate in the unused sick leave credit program, in which unused sick leave credits may be used at the time of retirement to pay the cost of group health insurance premiums.

This bill will be referred to the joint survey committee on retirement systems for a detailed analysis, which will be printed as an appendix to this bill.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB331, s. 1 Section 1. Chapter 37 of the statutes is created to read:

AB331,2,4 Chapter 37 University of Wisconsin optional retirement system

AB331,3,5 37.01 University of Wisconsin optional retirement system; compliance with federal tax laws. (1) The University of Wisconsin optional retirement system is created for the purpose of providing retirement annuities to eligible employes of the University of Wisconsin System who are not participating employes in the Wisconsin retirement system.

AB331,3,12 (2) The University of Wisconsin optional retirement system is established as a governmental plan and as a qualified plan for federal income tax purposes under section 401 (a) or 403 (a) or (b) of the Internal Revenue Code and shall be so maintained and administered. No benefit plan authorized under this chapter may be administered in a manner which violates an Internal Revenue Code provision that authorizes or regulates that benefit plan or which would cause an otherwise tax-exempt benefit to become taxable under the Internal Revenue Code.

AB331,3,13 37.02 Definitions. In this chapter:

AB331,3,16 (1) "Beginning date" means the date specified in the first contract entered into by the board under s. 37.07 on which an annuity may be purchased for a participating employe.

AB331,3,17 (2) "Board" means the board of regents of the University of Wisconsin System.

AB331,3,19 (3) "Eligible employe" means an employe of the University of Wisconsin System described under s. 20.923 (4), (4m), (5) or (6) (m) or 230.08 (2) (d).

AB331,3,20 (4) "Insurer" has the meaning given in s. 600.03 (27).

AB331,3,23 (5) "Internal Revenue Code" means the Internal Revenue Code, as defined for the current taxable year under s. 71.01 (6), and applicable regulations adopted under the Internal Revenue Code, including temporary regulations.

AB331,4,3 (6) "Participating employe" means an eligible employe who is currently in the service of, or who is on a leave of absence from, the University of Wisconsin System, who has met the requirements for inclusion within the University of Wisconsin optional retirement system under s. 37.04 and has elected to join the University of Wisconsin optional retirement system.

AB331,4,5 (7) "Participating employe in the Wisconsin retirement system" means a participating employe, as defined in s. 40.02 (46).

AB331,4,7 (8) "Wisconsin retirement system" means the Wisconsin retirement system established under ch. 40.

AB331,4,8 37.03 Powers and duties. The board:

AB331,4,10 (1) Shall manage and administer the University of Wisconsin optional retirement system.

AB331,4,15 (2) Shall ensure that the University of Wisconsin optional retirement system complies with the Internal Revenue Code as a qualified plan under section 401 (a) or 403 (a) or (b) of the Internal Revenue Code for income tax purposes and any benefit plan under this chapter is administered in a manner consistent with all Internal Revenue Code provisions that authorize and regulate the benefit plan.

AB331,4,17 (3) Shall promulgate rules necessary for the administration of the University of Wisconsin optional retirement system.

AB331,4,20 (4) May delegate any powers and duties that the board considers necessary or desirable for the purpose of administering the University of Wisconsin optional retirement system.

AB331,4,22 (5) Shall provide for long-term disability insurance for all participating employes.

AB331,4,25 37.04 Participation. (1) Any eligible employe of the University of Wisconsin System may become a participating employe if all of the following conditions are satisfied:

AB331,5,2 (a) The employe is first employed by the University of Wisconsin System on or after the beginning date.

AB331,5,6 (b) The employe is expected to work at least one-third of what is considered full-time employment by the board, as determined by rule, and the employe has an expected duration of employment with the University of Wisconsin System of at least one year.

AB331,5,13 (c) The employe elects to participate in the University of Wisconsin optional retirement system by notifying the board in writing, on a form provided by the board, no later than 60 days after the date of the employe's initial appointment with the University of Wisconsin System. Subject to sub. (4) (b), an election under this paragraph to participate in the University of Wisconsin optional retirement system shall be an irrevocable election during the employe's duration of employment with the University of Wisconsin System.

AB331,5,16 (d) The employe is not a participating employe in the Wisconsin retirement system while the employe is a participating employe in the University of Wisconsin optional retirement system.

AB331,5,18 (e) The employe is not receiving a retirement annuity from the Wisconsin retirement system.

AB331,5,22 (2) An eligible employe who elects to participate in the University of Wisconsin optional retirement system under sub. (1) shall be considered to have been a participating employe since the date of the employe's initial appointment with the University of Wisconsin System.

AB331,6,2 (3) If an eligible employe elects to participate in the University of Wisconsin optional retirement system under this section, but is at the time of election a participating employe in the Wisconsin retirement system, the board shall notify the department of employe trust funds in writing that the employe is no longer a participating employe in the Wisconsin retirement system.

AB331,6,7 (4) (a) Except as provided in par. (b), any eligible employe who elects to participate in the University of Wisconsin optional retirement system under sub. (1) may not subsequently become a participating employe in the Wisconsin retirement system during the period of his or her employment with the University of Wisconsin System.

AB331,6,18 (b) If a participating employe terminates employment with the University of Wisconsin System and is subsequently rehired by the University of Wisconsin System, the employe is not required to become a participating employe. But if the employe is an eligible employe and satisfies the conditions specified in sub. (1) (b), (d) and (e), the employe may elect again to become a participating employe. If the employe elects to become a participating employe, he or she must notify the board in writing, on a form provided by the board, no later than 60 days after the date of the employe's subsequent appointment with the University of Wisconsin System. Any eligible employe who elects to become a participating employe under this paragraph shall be considered to have been a participating employe since the date of his or her subsequent appointment with the University of Wisconsin System.

AB331,6,21 37.06 Contributions. (1) The board shall remit to the insurer or insurers under contract with the board under s. 37.07 retirement contributions for each participating employe that equal the sum of all of the following:

AB331,6,24 (a) An amount that equals the amount of the employe contribution that would be paid under s. 40.05 (1) for the participating employe if he or she were a participating employe in the Wisconsin retirement system.

AB331,7,3 (b) An amount that equals the amount of the employer contribution that would be paid under s. 40.05 (2) (a) for the participating employe if he or she were a participating employe in the Wisconsin retirement system.

AB331,7,4 (2) The board shall pay all retirement contributions for participating employes.

AB331,7,6 (3) Participating employes shall be immediately vested in all retirement contributions paid on their behalf under this section.

AB331,7,12 37.07 Contracts. The board shall enter into contracts with one or more insurers authorized to transact insurance business in this state to provide retirement annuities to participating employes. The contract shall provide for retirement annuities that are fixed or variable or a combination thereof. In determining the insurer with whom the board shall enter into a contract, the board shall consider all of the following:

AB331,7,14 (1) The ability of the insurer to provide the retirement annuities to participating employes.

AB331,7,15 (2) The financial stability of the insurer.

AB331,7,18 (3) The desirability of the insurer to the board for the purpose of recruiting and retaining faculty, as defined in s. 36.05 (8), and academic staff, as defined in s. 36.05 (1).

AB331, s. 2 Section 2. 40.02 (25) (a) 7. of the statutes is created to read:

AB331,8,3 40.02 (25) (a) 7. Any participating employe in the University of Wisconsin optional retirement system who has been participating under the University of Wisconsin optional retirement system for a period of at least 6 months prior to attainment of age 70, not including any period of leave of absence without pay, or any participating employe in the University of Wisconsin optional retirement system who immediately prior to becoming a participating employe in the University of Wisconsin optional retirement system had been participating under the Wisconsin retirement system for a period of at least 6 months, but only with respect to group insurance other than long-term disability insurance.

AB331, s. 3 Section 3. 40.02 (25) (b) 6m. a. of the statutes is amended to read:

AB331,8,7 40.02 (25) (b) 6m. a. A retired employe of the state who is receiving a retirement annuity under this chapter or ch. 37 or has received a lump sum payment under s. 40.25 (1).

AB331, s. 4 Section 4. 40.02 (25) (b) 12. of the statutes is created to read:

AB331,8,10 40.02 (25) (b) 12. Any participating employe in the University of Wisconsin optional retirement system, notwithstanding par. (a) 7.

AB331, s. 5 Section 5. 40.02 (46m) of the statutes is created to read:

AB331,8,13 40.02 (46m) "Participating employe in the University of Wisconsin optional retirement system" means a participating employe, as defined in s. 37.02 (6).

AB331, s. 6 Section 6. 40.02 (49) of the statutes is amended to read:

AB331,8,19 40.02 (49) "Retired employe" means a former insured employe who is not a participating employe and who is retired on an immediate or disability annuity under this chapter or ch. 37 or who receives a lump sum payment under s. 40.25 (1) which would have been an immediate annuity if paid as an annuity or who is an eligible employe under sub. (25) (b) 6. or 6g.

AB331, s. 7 Section 7. 40.02 (57g) of the statutes is created to read:

AB331,8,22 40.02 (57g) "University of Wisconsin optional retirement system" means the University of Wisconsin optional retirement system established under ch. 37.

AB331, s. 8 Section 8. 40.05 (2) (b) of the statutes is amended to read:

AB331,9,13 40.05 (2) (b) Contributions shall be made by each participating employer for unfunded prior service liability in a percentage of the earnings of each participating employe. A separate percentage rate shall be determined for the employe occupational categories under s. 40.23 (2m) as of the employer's effective date of participation. The rates shall be sufficient to amortize as a level percent of payroll over a period of 40 years from the later of that date or January 1, 1986, the unfunded prior service liability for the categories of employes of each employer determined under s. 40.05 (2) (b), 1981 stats., increased to reflect any creditable prior service granted on or after January 1, 1986, increased to reflect the effect of 1983 Wisconsin Act 141, increased at the end of each calendar year after January 1, 1986, by interest at the assumed rate on the unpaid balance at the end of the year and adjusted under pars. (bv) and (bw). For the purpose of calculating contributions for the unfunded prior service liability of the University of Wisconsin System, the earnings of each participating employe in the University of Wisconsin optional retirement system shall be included.

AB331, s. 9 Section 9. 40.05 (4) (b) of the statutes, as affected by 1995 Wisconsin Act 27, section 1957r, is amended to read:

AB331,9,25 40.05 (4) (b) Except as provided under pars. (bc) and (bp), accumulated unused sick leave under ss. 13.121 (4), 36.30, 230.35 (2), 233.10 and 757.02 (5) and subch. I or V of ch. 111 of any eligible employe shall, at the time of death, upon qualifying for an immediate annuity under this chapter or ch. 37 or for a lump sum payment under s. 40.25 (1) or upon termination of creditable service and qualifying as an eligible employe under s. 40.02 (25) (b) 6. or, 10. or 12., be converted, at the employe's current basic pay rate, to credits for payment of health insurance premiums on behalf of the employe or the employe's surviving insured dependents. The full premium for any eligible employe who is insured at the time of retirement, or for the surviving insured dependents of an eligible employe who is deceased, shall be deducted from the credits until the credits are exhausted and paid from the account under s. 40.04 (10), and then deducted from annuity payments, if the annuity is sufficient. The department shall provide for the direct payment of premiums by the insured to the insurer if the premium to be withheld exceeds the annuity payment. Except as provided in par. (bd), upon conversion of an employe's unused sick leave to credits under this paragraph or par. (bf), the employe or, if the employe is deceased, the employe's surviving insured dependents may elect to delay initiation of deductions from those credits for up to 10 years after the date of the conversion if the employe or surviving insured dependents are covered by a comparable health insurance plan or policy during the period beginning on the date of the conversion and ending on the last day of the 2nd month after the date on which the employe or surviving insured dependents later elect to initiate deductions from those credits. A health insurance plan or policy is considered comparable if it provides hospital and medical benefits that are substantially equivalent to the standard health insurance plan established under s. 40.52 (1).

AB331, s. 10 Section 10. 40.22 (2) (m) of the statutes is created to read:

AB331,10,18 40.22 (2) (m) The employe is a participating employe in the University of Wisconsin optional retirement system.

AB331, s. 11 Section 11. Effective date.

AB331,10,21 (1) This act takes effect on July 1, 1997, or on the day after publication, whichever is later.

AB331,10,22 (End)