15-1451. Optional retirement plans

A. Pursuant to section 15-1444, subsection B, paragraph 7, a community college district board may establish an optional retirement program under which contracts providing retirement and death benefits may be purchased for employees of the institutions under its jurisdiction as designated by the community college district board.

B. An optional retirement program established pursuant to this section shall:

1. Be designed to be a qualified governmental plan under section 401(a) of the internal revenue code.

2. Comply with all requirements of the internal revenue code applicable to governmental plans.

3. Be a qualified plan under section 401(a) of the internal revenue code.

4. Apply for and maintain a current letter of determination issued by the United States internal revenue service.

5. Be a qualified pick-up plan as defined by section 414(h)(2) of the internal revenue code as confirmed by a private letter ruling issued by the United States internal revenue service.

6. Provide benefits through annuity contracts that are fixed or variable in nature or that are a combination of fixed and variable.

C. Eligible employees may elect to participate in an optional retirement plan established by the community college district board. The eligible employee shall make the election in writing and file the election with the Arizona state retirement system and the disbursing officer of the employing institution. The eligible employee shall make the election either:

1. Within thirty days of the employee's effective date of employment.

2. If the employee is a member of the Arizona state retirement system on the date the optional retirement program becomes effective, within ninety days of the effective date of the optional retirement program.

D. If an employee who is a nonretired member of the Arizona state retirement system elects to participate in an optional retirement program pursuant to subsection C of this section, the Arizona state retirement system shall transfer the employee's contributions to the Arizona state retirement system and interest as determined by the board of the Arizona state retirement system to the optional retirement program within the later of ninety days after the election or ninety days after receipt by the optional retirement program of a favorable letter of determination issued by the United States internal revenue service. If an eligible employee fails to make an election as provided in subsection C of this section, the employee is deemed to have elected to participate in the Arizona state retirement system. The election to participate in an optional retirement program is irrevocable and constitutes a waiver of all benefits provided by the Arizona state retirement system. All eligible employees who elect to participate in an optional retirement program shall remain participants in the optional retirement program during the continuance of employment with the community college district.

E. The community college district board shall make contributions from public monies appropriated or any other monies available for this purpose on behalf of each participant in the optional retirement program in an amount that is at least equal to the employer contribution prescribed in title 38, chapter 5, article 2.

F. Subject to subsection H of this section, each community college district board that establishes an optional retirement program shall establish program provisions, including:

1. Categories of employees that are eligible to elect to participate in the optional retirement program.

2. The employee contribution rate. This rate may be greater than the employee contribution rate prescribed in title 38, chapter 5, article 2.

3. A vesting period for employer contributions, if any. All employee contributions that are picked up by the employer are fully vested at all times.

4. Restrictions on benefits, except that the optional retirement program shall not allow a participant to withdraw employer contributions except as retirement income payable for life or to provide for loans on retirement income.

G. A community college district board may elect to provide health or long-term disability coverage to optional retirement program participants under separate benefit plans. The community college district board may allocate a portion of its employer contribution that would otherwise be made to the optional retirement program under subsection E of this section to the separate benefit plans to provide health or long-term disability coverage.

H. Community college district boards that establish an optional retirement program under this section may enter into intergovernmental agreements appointing a single administrator or designating a single community college district board to administer the optional retirement program. A community college district board may satisfy the requirements of this section by entering into an intergovernmental agreement with another community college district board to participate in that community college district's optional retirement program. The administration shall include, without limitation, the design and implementation of the plan document establishing the optional retirement program, compliance with the qualification requirements prescribed in subsection B of this section and such other duties that are not inconsistent with this section as may be delegated to the administrator pursuant to the intergovernmental agreements entered into among the community college district boards.

I. Although designated as employee contributions, all employee contributions made to an optional retirement program shall be picked up and paid by the community college district in lieu of contributions by the employee. The contributions picked up by a community college district may be made through a reduction in the employees' salary or an offset against future salary increases, or a combination of both. The employees participating in the optional retirement program do not have the option of choosing to receive the contributed amounts directly instead of the community college district paying the amounts to the optional retirement program. It is intended that all employee contributions that are picked up by the community college district as provided in this subsection shall be treated as employer contributions under section 414(h) of the internal revenue code and shall be excluded from the employees' gross income for federal and state income tax purposes and are includable in the gross income of the employees or their beneficiaries only in the taxable year in which they are distributed.

J. A community college district board shall not be liable to any employee, retiree or other person for any reason relating to the community college district board's provision of or failure to provide for an optional retirement program or health or long-term disability coverage.