GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2011
H D
HOUSE DRH70148-LL-106 (3/7)
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Short Title: Local Bds of Education/403(b) Option. |
(Public) |
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Sponsors: |
Representative Fisher. |
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Referred to: |
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A BILL TO BE ENTITLED
AN ACT to authorize the department of state treasurer to create a centralized 403(B) retirement annuity plan as an option for employees of local boards of education.
The General Assembly of North Carolina enacts:
SECTION 1. G.S. 115C-341 reads as rewritten:
"§ 115C-341.
Annuity contracts. contracts from local boards of education.
Notwithstanding the provisions of this Chapter for the adoption of State and local salary schedules for the pay of teachers, principals, superintendents, and other school employees, local boards of education may enter into annual contracts with any employee of such board which provide for a reduction in salary below the total established compensation or salary schedule for a term of one year. The local board of education shall use the funds derived from the reduction in the salary of the employee to purchase a nonforfeitable annuity contract for the benefit of said employee. An employee who has agreed to a salary reduction for this purpose shall not have the right to receive the amount of the salary reduction in cash or in any other way except the annuity contract. Funds used by the local boards of education for the purchase of an annuity contract shall not be in lieu of any amount earned by the employee before his election for a salary reduction has become effective.
The agreement for salary reductions referred to herein shall be effected under any necessary regulations and procedures adopted by the State Board of Education and on forms prepared by the State Board of Education.
Notwithstanding any other provisions of this section, the amount by which the salary of any employee is reduced pursuant to this section shall be included in computing and making payroll deductions for social security and retirement system purposes, and in computing and providing matching funds for retirement system purposes.
In lieu of the annuity contracts provided for under this section, interests in custodial accounts pursuant to Section 401(f), Section 403(b)(7), and related sections of the Internal Revenue Code of 1986 as amended may be purchased by local boards of education for the benefit of qualified employees under this section with the funds derived from the reduction in the salaries of such employees."
SECTION 2. Article 23 of Chapter 115C of the General Statutes is amended by adding a new section to read:
"§ 115C-341A. Annuity contracts from the Department of State Treasurer.
(a) In addition to the opportunities for local boards of education to offer Section 403(b) retirement annuities to their employees under G.S. 115C-341, the Department of State Treasurer may establish a centralized list of approved third-party vendors of annuity contracts and custodial accounts as are described in Section 403(b) of the Internal Revenue Code of 1986, as now and hereafter amended, pursuant to which employees of local school boards may enter into nonforfeitable annuity contracts by way of salary reduction through the auspices of the Department of State Treasurer. The vendor list authorized under this section shall be established, maintained, and amended by use of State procurement procedures, with the goal of attaining lower administrative fees for participants and improved compliance with applicable law by vendors. Eligible employees of local school boards shall all be allowed to select from this centralized list the tax-deferred annuity of their choice; and employees' rights to make this selection shall not be interfered with by their respective local school employers or those employers' vendors.
(b) The following criteria apply to the Department of State Treasurer's Section 403(b) offerings to employees of local school boards under this section:
(1) Annuity contracts and custodial accounts may be administered by a qualified third-party administrator that shall, under written agreement with the Department of State Treasurer, provide custodial, record-keeping, or administrative services, or any combination of those services. The third-party administrator may not provide investment options.
If the Department uses a third-party administrator for administrative services, that administrator shall, at a minimum:
a. Maintain written plan documents;
b. Review hardship withdrawal requests, loan requests, and other disbursements permitted under Section 403(b);
c. Maintain specimen salary reduction agreements for the employer and employees of that employer to initiate payroll deferrals;
d. Monitor maximum contributions;
e. Coordinate responses to the Internal Revenue Service in any case of an IRS audit;
f. Generate educational communication materials to employees concerning the enrollment process, program eligibility, and investment options;
g. Maintain internal reports to ensure compliance with Section 403(b) of the Internal Revenue Code and Title 26 of the Code of Federal Regulations; and
h. Keep an updated schedule of vendor fees and commissions.
(2) Investment options shall be determined by the Department of State Treasurer consistent with those annuity contract and custodial accounts described in Section 403(b) of the Internal Revenue Code of 1986, as amended.
(3) Investment staff of the Department of State Treasurer may make recommendations to the State Treasurer as to appropriate investment options. At a minimum, the State Treasurer shall offer at least three investment options. The State Treasurer shall have sole responsibility for the selection of service providers.
(4) All contributions made in accordance with the provisions of Section 403(b) of the Internal Revenue Code of 1986, as amended, and this section shall be remitted directly to the administrator in a custodial account on behalf of each participating employee. Any investment gains or losses shall be credited to those accounts. The forms of payment and disbursement procedures shall be consistent with those generally offered by similar annuity contracts and custodial accounts and applicable federal and State statutes governing those contracts and accounts.
(5) Any local board of education may elect to make contributions to the employee's annuity contract and custodial account on behalf of the employee. The employer shall take whatever action is necessary to implement this section.
(6) The design and administration of the annuity contracts and custodial accounts under this provision shall comply with the applicable provisions of the Internal Revenue Code of 1986, as amended."
SECTION 3. This act becomes effective July 1, 2011.