RAC:cmh:km
1999 - 2000 LEGISLATURE
January 19, 2000 - Introduced by
Law Revision Committee. Referred to Joint
survey committee on Retirement Systems.
SB326,2,2
1An Act to amend 40.02 (1), 40.02 (2), 40.02 (15) (c) 4., 40.02 (38), 40.04 (4) (a) 1.,
240.04 (4) (a) 2., 40.04 (7) (intro.), 40.04 (7) (a) (intro.), 40.04 (7) (c), 40.05 (1) (a)
37., 40.05 (2) (g) 2., 40.08 (7) (a), 40.23 (1) (b), 40.24 (1) (f), 40.24 (3), 40.24 (7) (a)
44., 40.25 (1) (a), 40.25 (1) (b), 40.25 (3m), 40.25 (4), 40.25 (6) (a) 1., 40.25 (6) (a)
52., 40.25 (7) (a) 2., 40.25 (7) (a) 3., 40.26 (2) (a), 40.26 (2) (b), 40.28 (1) (a) 1., 40.63
6(9) (b), 40.63 (10) and 40.73 (1) (b);
to repeal and recreate 40.08 (4); and
to
7create 40.02 (54v), 40.05 (1) (a) 5m. and 40.80 (2) (g) of the statutes;
relating
8to: the making of additional retirement contributions by participants in the
9Wisconsin retirement system; deferred compensation programs established by
10the deferred compensation board; purchase of forfeited creditable service under
11the Wisconsin retirement system; reimbursement of moneys paid by the
12department of employe trust funds as a result of misrepresentation, fraud or
1error; and creditable military service under the Wisconsin retirement system
2(suggested as remedial legislation by the department of employe trust funds).
Analysis by the Legislative Reference Bureau
Current law permits the making of additional contributions by participants in
the Wisconsin retirement system (WRS). These contributions are in addition to the
employer and employe required contributions to the WRS. Additional contributions
may be used to purchase an annuity at the time of retirement. This bill specifies that
there are two different kinds of additional contributions that may be made by
participating employes to the WRS: after-tax additional contributions made under
section
401 (a) of the Internal Revenue Code (IRC); and tax-deferred additional
contributions made under section 403 (b) of the IRC.
Under current law, any participant in the WRS, subject to rules promulgated
by the secretary of employe trust funds, may elect as a payout option for a deferred
compensation plan established by the deferred compensation board or a plan
established by his or her employer, if his or her employer is a local government
employer, to have the entire balance treated as an additional contribution to the fixed
annuity division of the employe trust fund. (To date, the rules have not been
promulgated.) This bill provides that this option is available only for a deferred
compensation plan established by the deferred compensation board.
The bill also specifies that the deferred compensation board must serve as
trustee of any deferred compensation plan it establishes and must hold the assets
and income of the plan in trust for the exclusive benefit of the employes who
participate in the plan and their beneficiaries.
Under current law, a participating employe in the WRS may purchase
creditable service that he or she may have forfeited in the past. In addition, a
participating employe may purchase creditable service under the WRS for service as
an employe of the federal government or for service as an employe of an employer
that was not covered under the WRS during the period in which the service was
performed, but that subsequently became an employer under the WRS. In order to
purchase such service, the employe must have at least three continuous years of
creditable service under the WRS at the time of application and the number of years
that an employe may purchase may not exceed the lesser of ten years or the number
of years of creditable service that the employe has at the time of application.
This bill provides that the employe must have at least three continuous years
of creditable current service under the WRS at the time of application. Under current
law, creditable current service is defined as "the creditable service granted for service
performed for a participating employer and for which a participating employe
receives earnings after the effective date of participation for that employer".
In addition, the bill provides that creditable service previously purchased by a
participating employe may not be used to determine the maximum amount of service
that a participating employe may purchase.
Under current law, the department of employe trust funds (DETF) may retain
out of any person's annuity or benefit an amount that DETF has determined was paid
to the person as a result of misrepresentation, fraud or error. This bill authorizes
DETF to secure these inadvertently paid moneys by a lien against the person's
account in the employe accumulation reserve of the employe trust fund and any
annuity, benefit or obligation of the employe trust fund that is payable or will become
payable to the person or the person's beneficiaries.
Currently, under certain conditions, a participating employe under the WRS
may receive one year of creditable service under the WRS for each year of military
service, up to a maximum of four years of military service credit. However, the
participant may not receive military service credits for military service that is used
for the purpose of establishing entitlement to a retirement benefit that is paid by the
federal government, other than for the nonregular military service program.
This bill provides the new statutory cross-reference to the U.S. Code provision
referring to the nonregular military service program.
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 Notes provided by the law revision committee
of the joint legislative council.
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:
Law revision committee prefatory note: This bill is a remedial legislation
proposal, requested by the department of employe trust funds and introduced by the law
revision committee under s. 13.83 (1) (c) 4., stats. After careful consideration of the
various provisions of the bill, the law revision committee has determined that this bill
makes minor substantive changes in the statutes, and that these changes are desirable
as a matter of public policy.
SB326, s. 1
1Section
1. 40.02 (1) of the statutes is amended to read:
SB326,3,52
40.02
(1) "Accumulation" means the total employe required contributions
or, 3employer required contributions
or, additional contributions
or tax-deferred
4additional contributions as increased or decreased by application of investment
5earnings.
Note: The definition is amended to specify that it includes both after-tax
additional contributions and tax-deferred (pre-tax) additional contributions.
SB326, s. 2
6Section
2. 40.02 (2) of the statutes is amended to read:
SB326,4,3
140.02
(2) "Additional contribution" means any
after-tax contribution made by
2or on behalf of a participant to the retirement system other than employe and
3employer required contributions.
Note: The definition of "additional contribution" is amended to make the term
refer only to an after-tax contribution. See also the new definition created by Section
5.
SB326, s. 3
4Section
3. 40.02 (15) (c) 4. of the statutes is amended to read:
SB326,4,115
40.02
(15) (c) 4. This paragraph does not apply to any active service used for
6the purpose of establishing entitlement to, or the amount of, any benefit, other than
7a disability benefit, to be paid by any federal retirement program except OASDHI
8and the retired pay for nonregular military service program under
10 USC 1331 to
91337 12731 to 12738 or, if the participant makes an election under s. 40.30 (2), by any
10retirement system specified in s. 40.30 (2) other than the Wisconsin retirement
11system.
Note: This change corrects references to the federal tax code's provisions relating
to military service credit.
SB326, s. 4
12Section
4. 40.02 (38) of the statutes is amended to read:
SB326,4,1513
40.02
(38) "Immediate annuity" means an annuity, not including an annuity
14from additional contributions
or tax-deferred additional contributions, which begins
15to accrue not later than 30 days after termination of employment.
Note: The definition of "immediate annuity" is amended to exclude both categories
of additional contributions.
SB326, s. 5
16Section
5
. 40.02 (54v) of the statutes is created to read:
SB326,4,1917
40.02
(54v) "Tax-deferred additional contribution" means any contribution
18made to the retirement system by a participating employe as a pre-tax deduction
19from earnings under section
403 (b) of the Internal Revenue Code.
Note: The new definition of "tax-deferred additional contribution" distinguishes
these pre-tax contributions from additional (after-tax) contributions.
SB326, s. 6
1Section
6
. 40.04 (4) (a) 1. of the statutes is amended to read:
SB326,5,62
40.04
(4) (a) 1. Credited with all employe contributions made under s. 40.05 (1),
3all employer additional contributions made under s. 40.05 (2) (g) 1., all additional
4contributions under s. 40.05 (2) (g) 2.
, all tax-deferred additional contributions
5under s. 40.05 (1) (a) 5m. and all contribution accumulations reestablished under s.
640.26 or 40.63 (10).
Note: Sections 6
to 10 amend provisions relating to the accounting of
contributions to create separate accounting for each category of additional contributions.
SB326,5,209
40.04
(4) (a) 2. Credited as of each December 31 with interest on the prior year's
10closing balance at the effective rate on all employe required contribution
11accumulations in the variable annuity division, on all employe required
12contributions in the fixed annuity division on December 31, 1984, on all employe
13required contributions in the fixed annuity division of participants who are not
14participating employes after December 31, 1984,
and on all employe and employer
15additional contribution accumulations
and on all tax-deferred additional
16contribution accumulations and with interest on the prior year's closing balance at
17the assumed benefit rate on all employe required contribution accumulations in the
18fixed annuity division for participants who are participating employes after
19December 31, 1984, but who terminated covered employment before December 30,
201999.
SB326, s. 8
21Section
8. 40.04 (7) (intro.) of the statutes is amended to read:
SB326,6,322
40.04
(7) (intro.) The reserves established under subs. (4), (5) and (6) shall be
23divided both individually and for the purposes of sub. (3) between a fixed annuity
1division and a variable annuity division. All required
and, additional
and
2tax-deferred additional contributions shall be credited to the fixed annuity division
3except:
SB326,7,26
40.04
(7) (a) (intro.) As otherwise elected by a participant prior to April 30,
71980, or on or after January 1, 2001. Any participant who was a participant prior
8to April 30, 1980, and whose accounts on January 1, 1982, include credits segregated
9for a variable annuity shall have his or her required
and
, additional
and tax-deferred
10additional contributions made on or after January 1, 1982, credited to the variable
11annuity division in a manner consistent with the participant's election prior to April
1230, 1980, unless prior to January 1, 1982, the participant terminated such election
13under s. 40.85, 1979 stats. Any participant who elects or has elected to have any of
14his or her credits segregated for a variable annuity on or after January 1, 2001, shall
15have 50% of his or her required
and, additional
and tax-deferred additional 16contributions made on or after the date of election credited to the variable annuity
17division. The department shall by rule provide that any participant who elects or has
18elected variable participation prior to April 30, 1980, or on or after January 1, 2001,
19may elect to cancel that variable participation as to future contributions. The
20department's rules shall permit a participant who elects or has elected to cancel
21variable participation as to future contributions, or an annuitant, to elect to transfer
22previous variable contribution accumulations to the fixed annuity division. A
23transfer of variable contribution accumulations under this paragraph shall result in
24the participant receiving the accrued gain or loss from the participant's variable
25participation. A participant may specify that election to cancel participation in the
1variable annuity division is conditional. If the participant so specifies the election
2is effective on the first date on which it may take effect on which the participant:
SB326, s. 10
3Section
10
. 40.04 (7) (c) of the statutes is amended to read:
SB326,7,94
40.04
(7) (c) Any participant whose required contributions are segregated in
5any portion to provide for a variable annuity may direct that any part or all of
6subsequent additional
and tax-deferred additional contributions credited to the
7participant's account be segregated to provide for a variable annuity and may at any
8time by filing a form prescribed by the department change the portion being
9segregated for any future additional
and tax-deferred additional contributions.
SB326, s. 11
10Section
11. 40.05 (1) (a) 5m. of the statutes is created to read:
SB326,7,2211
40.05
(1) (a) 5m. Tax-deferred additional contributions may be made by any
12participating employe of an employer that had at least one employe who made such
13contributions to the Wisconsin retirement system or its predecessor systems under
14s. 42.30 (3), 1979 stats., on or before May 17, 1982. The making of contributions
15under this subdivision shall be subject to any limitations imposed on contributions
16by the Internal Revenue Code, applicable regulations adopted under the Internal
17Revenue Code and rules of the department. The participating employe and the
18employer are solely responsible for determining the amount of contributions that
19may be made to the retirement system under this subdivision and monitoring the
20annual contributions for compliance with any limitations imposed on contributions
21by the Internal Revenue Code, applicable regulations adopted under the Internal
22Revenue Code and rules of the department.
Note: The amended provision clarifies that only participating employes of eligible
employers may make tax-deferred additional contributions, and the responsibility for
determining the amount of contributions that can be made is the responsibility of the
employes and employers, not the Wisconsin Retirement System.
SB326, s. 12
23Section
12. 40.05 (1) (a) 7. of the statutes is amended to read:
SB326,8,6
140.05
(1) (a) 7. Subject to any applicable limitations under the internal revenue
2code, a participating employe may elect to use part or all of his or her
accumulated
3after-tax additional contributions, including interest, made under subd. 5.
, other
4than contributions treated by the department as contributions to a tax sheltered
5annuity under section 403 (b) of the internal revenue code, to purchase creditable
6service under this chapter.
Note: The amendment to this provision removes references relating to use of
accumulated after-tax additional contributions to purchase creditable service. The
amended provision refers to "additional contributions" which are defined as after-tax
contributions.
SB326, s. 13
7Section
13. 40.05 (2) (g) 2. of the statutes is amended to read:
SB326,8,198
40.05
(2) (g) 2. Under the rules promulgated under s. 40.03 (2) (r), a participant
9may, as a payout option for the deferred compensation plan established under
subch.
10VII s. 40.80, elect to have the entire balance in the participant's account under
subch.
11VII s. 40.80 treated as an additional contribution to the fixed annuity division,
12subject to any limitations imposed on contributions by the
internal revenue code 13Internal Revenue Code, applicable regulations adopted under the
internal revenue
14code Internal Revenue Code and rules of the department. Additional contributions
15under this subdivision shall be available for all benefit purposes and shall be
16administered and invested on the same basis as employe additional contributions,
17except that ss. 40.24 (1) (f) and 40.25 (4) do not apply to additional contributions
18under this subdivision and s. 40.26 does not apply to an annuity received from
19additional contributions under this subdivision.
Note: This amendment clarifies that the provision relates only to the deferred
compensation program established under s. 40.80, stats., for state employes, not to other
deferred compensation programs that may be established by an employer under s. 40.81,
stats.
SB326, s. 14
20Section
14. 40.08 (4) of the statutes is repealed and recreated to read:
SB326,9,6
140.08
(4) Reimbursements of moneys paid as a result of misrepresentation,
2fraud or error. (a) If the department has paid any money to a person or estate as
3a result of misrepresentation, fraud or error, the department shall determine the
4amount of such payment and shall require that the person or estate reimburse the
5department for this amount, plus interest at the effective rate of the fixed annuity
6division.
SB326,9,157
(b) If the department determines that any money has been paid to a person or
8estate as a result of misrepresentation, fraud or error, the department shall notify
9the person or the personal representative or special administrator of the person's
10estate by certified mail of this determination. The department shall send the notice
11to the last-known address of the person or the personal representative or special
12administrator of the person's estate. The notice shall inform the person of his or her
13right to a timely appeal. The notice must be sent within 7 years from the date that
14the department first acquires actual notice of the alleged misrepresentation, fraud
15or error.
SB326,9,2316
(c) The sending of the notice by the department under par. (b) shall constitute
17a lien against the person's separate account under s. 40.04 (4) (a) and any annuity,
18benefit or obligation of the employe trust fund that is payable or will become payable
19to the person or the person's beneficiaries. This lien takes precedence over all other
20withholdings, liens or encumbrances, whenever perfected, against the person's
21separate account under s. 40.04 (4) (a) and any annuity, benefit or obligation of the
22employe trust fund that is payable or will become payable to the person or the
23person's beneficiaries.
SB326,9,2524
(d) Subject to sub. (10), the department may do any of the following to provide
25for reimbursement of the amount or any portion of the amount due under par. (a):
SB326,10,2
11. Obtain voluntary repayment from the person or estate within a reasonable
2period, as determined by the department.
SB326,10,123
2. Foreclose on the lien against the person's separate account under s. 40.04 (4)
4(a) or any annuity, benefit or obligation of the employe trust fund that is payable or
5will become payable to the person or the person's beneficiaries. In foreclosing on this
6lien, the department may retain the amount or portion of the amount out of any
7annuity, benefit or obligation of the employe trust fund that is payable or will become
8payable to the person or the person's beneficiaries or may permanently reduce the
9person's annuity by the actuarial present value of the amount or portion of the
10amount that is due under par. (a). If the department forecloses on the lien, the
11department shall notify, by regular mail, the person or personal representative or
12special administrator of the person's estate of the foreclosure as soon as practical.
SB326,10,1613
3. Request that an employer withhold the amount or any portion of the amount
14from any sum payable by the employer to any person or estate. If an employer
15receives such a request, the employer shall withhold and remit the amount to the
16department.
SB326,10,1817
4. Bring a civil action against the person or estate for the amount or any portion
18of the amount that is not otherwise recovered by the department.
SB326,10,2019
(e) Any amount that is reimbursed to the department under par. (d) shall be
20credited to the appropriate benefit plan accounts.
Note: This provision repeals and recreates a provision that allows the department
of employe trust funds to collect any amount owed for benefits paid through
misrepresentation or fraud or error. The current provisions does not provide that the
amounts owed become a statutory lien. Therefore, any debts to the trust fund are
unsecured and can be discharged in bankruptcy. The amended provision will provide the
department with a mechanism to secure obligations to the trust fund with a lien against
other benefits also administered by the department, if the department has paid the
money to a person or an estate as a result of misrepresentation, fraud or error. A notice
of the fact that money has been paid to a person or an estate as a result of
misrepresentation, fraud or error, constitutes a lien against the person's account and any
annuity, benefit or obligation that the trust fund pays or will pay to the person or the
person's beneficiary.
SB326, s. 15
1Section
15. 40.08 (7) (a) of the statutes is amended to read:
SB326,11,112
40.08
(7) (a) Any overpayment or underpayment of a lump-sum payment
3under s. 40.25 or a death benefit which is less than 60% of the amount specified in
4s. 40.25 (1) (a) rounded to the next highest dollar amount, and any annuity payment
5error which is less than $2 per month may not be corrected but shall be credited or
6debited to the employer accumulation reserve or the appropriate insurance account.
7However, if the amount of unapplied additional contributions
or tax-deferred
8additional contributions would increase an annuity payment by less than $2 but is
9more than 60% of the amount specified in s. 40.25 (1) (a) rounded to the next highest
10dollar amount, the unapplied additional contributions
or tax-deferred additional
11contributions shall be paid to the annuitant as a lump sum.
Note: This provision, relating to overpayments and underpayments, is amended
to recognize that the provisions apply to both categories of additional contributions.
SB326, s. 16
12Section
16. 40.23 (1) (b) of the statutes is amended to read:
SB326,12,213
40.23
(1) (b) Except as provided in par. (bm), all retirement annuities shall be
14effective on the day following, or on the first day of a month following, the date of
15separation from the last participating employer by which the participant was
16employed, as specified by the participant in the written application for the annuity.
17However, the date shall not be more than 90 days prior to the date of receipt of the
18application by the department. The participant may specify that additional
and
19tax-deferred additional contribution accumulations shall not be applied to provide
20an annuity until a subsequent application is filed for an annuity to be paid from the
21additional
and tax-deferred additional contribution accumulations. The
22subsequent application shall be made as specified under sub. (4) or the department
1shall automatically distribute the accumulated additional
and tax-deferred
2additional contribution accumulations as a lump sum.
Note: This provision is amended to clarify that the treatment of retirement
annuities applies to both categories of additional contributions.
SB326, s. 17
3Section
17
. 40.24 (1) (f) of the statutes is amended to read:
SB326,12,194
40.24
(1) (f) From accumulated additional contributions made under s. 40.05
5(1) (a) 5.
and tax-deferred additional contribution accumulations made under s.
640.05 (1) (a) 5m. only, an annuity certain payable for and terminating after the
7number of months specified by the applicant, regardless of whether the applicant
8dies before or after the number of months specified, provided that the monthly
9amount of the annuity certain is at least equal to the minimum amount established
10under s. 40.25 (1) (a). Subject to the period of distribution required under s. 40.23
11(4) (b) 2., the number of months specified shall not exceed 180 and shall not be less
12than 24.
At any time before the expiration of the certain period, the annuitant may
13elect to receive a lump-sum payment equal to the present value of the remaining
14monthly payments. If the death of the annuitant occurs prior to the expiration of the
15certain period, the remaining payments shall be made in accordance with s. 40.73
16(2) without regard to any other annuity payments payable to the beneficiary. An
17annuity under this paragraph may be initiated prior to any other annuity amount
18provided under this subchapter and prior to age 55 if all other qualifications for
19receiving an annuity payment are met.
SB326, s. 18
20Section
18. 40.24 (3) of the statutes is amended to read:
SB326,12,2321
40.24
(3) Any participant specified under sub. (1) (intro.) may elect to receive
22the amount provided by accumulated additional contributions
and tax-deferred
23additional contributions in a different optional form than the balance of the annuity.
SB326, s. 19
1Section
19
. 40.24 (7) (a) 4. of the statutes is amended to read:
SB326,13,32
40.24
(7) (a) 4. Benefits paid from accumulated additional contributions
and
3tax-deferred additional contributions.
Note: The changes made by Sections
17 to 19 to provisions relating to annuity
options, clarify that these provisions apply to both categories of additional contributions.
SB326, s. 20
4Section
20
. 40.25 (1) (a) of the statutes is amended to read:
