(Reprint)

Session of 2000
HOUSE BILL No. 2718 By Representatives Carmody, Aurand, Phill Kline, Myers, Powell, Sloan and Wilk 1-26

12 AN ACT concerning retirement; relating to defined contribution plan
13 for employees who are members of the Kansas public employees re-
14 tirement system or who become employed after the effective date of
15 the act.
16
17 Be it enacted by the Legislature of the State of Kansas:
18 Section 1. (a) The board of trustees of the Kansas public employees
19 retirement system shall offer a defined contribution retirement plan for
20 officers and employees who are members of the Kansas public employees
21 retirement plan for officers and employees who are members of the Kan-
22 sas public employees retirement system. The retirement plan shall qualify
23 as a defined contribution plan under section 401(a) of the federal internal
24 revenue code of 1986, as amended. The retirement plan shall provide
25 retirement and death benefits for participants through the purchase of
26 financial retirement products for their individual accounts, including fixed
27 or variable annuities and mutual funds, and shall be implemented upon
28 the effective date of this act. Participation in the retirement plan offered
29 pursuant to this section shall be in lieu of the Kansas public employees
30 retirement system as in effect prior to the effective date of this act.
31 (b) Each such officer or employee who is a member prior to the
32 effective date of this act shall elect to be a member of the Kansas public
33 employees retirement system or to participate in the retirement plan of-
34 fered pursuant to this section. The election must be filed by October 1,
35 2001. Such election is irrevocable. If such election is not filed by the
36 member, such member shall be a member of the Kansas public employ-
37 ees retirement system as in effect prior to the effective date of this act.
38 Each officer or employee who elects to participate in the defined contri-
39 bution retirement plan as provided in this section who has accrued service
40 credit in the Kansas public employees retirement system prior to the
41 effective date of this act shall have the actuarial present value thereof
42 determined as of the effective date of this act. No participating service
43 after the effective date of this act shall affect such determination. The

2
1 actuarial present value of the accrued service credit of each officer or
2 employee who elects to participate in the defined contribution plan shall
3 be transferred directly to the designated provider in the plan and credited
4 to the participant's individual account. Such amount shall be taxed upon
5 distribution to such officer or employee in the same manner as a distri-
6 bution from the system as in effect prior to the effective date of this act.
7 (c) Each officer or employee becoming employed on or after the
8 effective date of this act shall participate in the retirement plan offered
9 pursuant to this section.
10 (d) Members who elect to participate in the defined contribution re-
11 tirement plan as provided in this section and officers and employees be-
12 coming employed on or after the effective date of this act shall contribute
13 an amount for each payroll period equal to 4% of such member's or
14 officer's or employee's compensation. The state of Kansas shall contribute
15 to each member's or officer's or employee's account for each payroll pe-
16 riod the amount that would have been contributed to the Kansas public
17 retirement system on behalf of such member, officer or employee, re-
18 duced by the amount necessary to mitigate the negative financial impact,
19 if any, on the system resulting from the establishment of this defined
20 contribution retirement plan. The negative financial impact on the sys-
21 tem, if any, shall be actuarially determined as of July 1, 2002, and any
22 reduction in contributions resulting therefrom shall become effective on
23 January 1, 2003. Contributions to plan shall be made through payroll
24 deductions on a pre-tax basis and shall not be subject to taxation until
25 distribution is actually made to or on behalf of the member or officer or
26 employee. If a member, officer or employee has the opportunity, through
27 such person's employer, to participate in a tax sheltered annuity plan
28 authorized under section 403(b), a deferred compensation plan author-
29 ized under section 457, or a cash or deferred arrangement available pur-
30 suant to section 401(k) of the federal internal revenue code, as amended,
31 such person, through salary reduction or deduction, may make additional
32 contributions on a pre-tax basis to such other plan, subject to federal
33 limitations.
34 (e) Members who elect to participate in the defined contribution re-
35 tirement plan offered pursuant to this section and officers or employees
36 becoming employed after the effective date of this act shall be granted a
37 fully vested retirement benefit in such retirement plan upon establish-
38 ment of their individual accounts with an approved provider.
39 (f) Any member who elects to participate in the defined contribution
40 retirement plan offered pursuant to this section or any officer or em-
41 ployee becoming employed after the effective date of this act shall be
42 eligible for the death and disability benefit provided in K.S.A. 74-4916,
43 and amendments thereto, and the death benefit, optional death benefit

3
1 and long-term disability benefit as provided in K.S.A. 74-4927, and
2 amendments thereto. The cost of such member's or officer's or em-
3 ployee's participation shall be paid by such member's or officer's or em-
4 ployee's participating employer as provided in K.S.A. 74-4927, and
5 amendments thereto.
6 (g) The board shall administer the defined contribution retirement
7 plan offered pursuant to this section and shall establish rules and regu-
8 lations for the administration of the plan. The board shall select four but
9 not more than eight provider companies, at least one of which shall be
10 incorporated in Kansas and all of which shall be fully licensed or qualified
11 to conduct business in Kansas, from which retirement products for the
12 defined contribution plan will be purchased. Potential provider compa-
13 nies may elect to submit competitive bids or proposals to serve only a
14 specific segment of the plan participants, if such segment is easily distin-
15 guishable from other plan participants such as participants in school em-
16 ployment, and the board may select one or more of the provider com-
17 panies to serve such segment if such segment also includes at least
18 one-third of all plan participants. In selecting the provider companies for
19 all or any segment of the plan participants, the board shall consider:
20 (1) The experience and demonstrated abilities of the provider com-
21 panies to provide the retirement products and related financial services
22 offered by them;
23 (2) the financial capabilities and ratings of the provider companies to
24 provide the rights and benefits under the retirement products offered by
25 them;
26 (3) the nature and extent of the rights and benefits to be provided to
27 participants and their beneficiaries under the retirement products of-
28 fered, including the level of risk borne by the provider companies;
29 (4) the diversity of the products offered and the suitability of the
30 rights and benefits under the retirement products offered to the needs
31 and interests of participants;
32 (5) the intrastate and interstate portability of the retirement products
33 offered, including the number of states in which the provider companies
34 provide such products under primary public employee defined contri-
35 bution pension plans;
36 (6) the experience and demonstrated abilities of the provider com-
37 panies to provide participant education, including plan transfer education
38 and analysis, continuing investment counseling and retirement decision
39 counseling, and enrollment, timely reports, retirement options and other
40 services to participants in the defined contribution retirement plan;
41 (7) the scope, convenience and expense of a participant's interaction
42 with a provider company, including the timing of and self-direction of
43 investments, access to account information, and changes to or transfers

4
1 between the products offered by such company, as well as a provider
2 company's policies and procedures regarding external transfers to other
3 provider companies; and
4 (8) the cost-effectiveness of the products and services offered taking
5 into account the criteria set forth in subsections (3), (6) and (7).
6 (h) The joint committee on pensions, investments and benefits shall
7 periodically review the companies selected to offer retirement products
8 under the defined contribution plan and the services provided and results
9 achieved by them to assure that the purposes of the plan are being met.
10 (i) The provisions of this section shall not apply to members of the
11 Kansas police and firemen's retirement system and the retirement system
12 for judges.
13 (j) The provision of this section shall be part of and supplemental to
14 the provisions of K.S.A. 74-4901 et seq., and amendments thereto.
15 Sec. 2. This act shall take effect and be in force from and after July
16 1, 2001, and its publication in the statute book.