HB 2283, to be effective immediately September 1, 2009, would provide the following changes:

·         Establish a qualified Roth contribution program in accordance with Section 402A, Internal Revenue Code of 1986, under which an employee may designate all or a portion of the employee's contribution under a 401(k) plan as a Roth contribution at the time the contribution is made.

·         Establish a program in accordance with the applicable federal law under which an employee may designate all or a portion of the employee's contribution under a 457 plan as a Roth contribution at the time the contribution is made.

·         The employee contributes one percent of the employee's compensation in the employee's first year of participation, and that contribution amount increases by an additional one percent in each succeeding year of participation until the employee's total annual contribution equals five percent of the employee's compensation.

• Allows the Employees Retirement System (ERS) to make matching contributions to a 401(k) plan on behalf of employees participating in the plan.  The ERS can only make a matching contribution if ERS receives a specific legislative appropriation and the retirement system:

1.       Receives amounts sufficient to cover normal cost

2.       Maintains a funded ratio equal to or greater than 90 percent

If appropriations to ERS are structured so retirement plan contributions could not be used for this defined contribution plan, there would be no impact on the retirement plan. Alternatively, if contributions to the ERS retirement plan were allowed to be used for this defined contribution plan, then it could have an actuarial impact.  

HB 2283 would not currently have an actuarial impact on the system. Under Section 609.5026, which would be added by the bill, the matching contributions to the defined contribution plan that the system would be allowed to make would only be allowed if the contributions to the defined benefit plan were sufficient to cover the normal cost and maintain a funded ratio of equal to or greater than 90 percent.  The current contributions to the system are not sufficient to cover the normal cost, so matching contributions to the defined contribution plan would not be allowed currently.  The system is currently over 90 percent funded using a smoothed actuarial value of assets as of 8/31/2008, but would be under 90 percent funded using a market value of assets.  In the future, if the system receives funds sufficient to cover the normal cost and the funded ratio is at least 90 percent, and a portion of the contributions intended for the defined benefit plan are subsequently used to fund state matching contributions in the defined contribution plan as permitted, then there would be an actuarial impact.  It is possible that the system could receive an amount that is not sufficient to make the defined benefit plan actuarially sound, and still be permitted to make matching contributions to the defined contribution plan.  For example, a contribution of the normal cost only without a payment towards amortization of the unfunded actuarial accrued liability would not be sufficient to make the plan actuarially sound.  It is possible that the system could receive an amount that is sufficient to make the defined benefit plan actuarially sound, but if system contributions were used to make matching contributions to the defined contribution plan, the system could become actuarially unsound.  If system contributions are increased beyond what would otherwise have been contributed to the defined benefit plan in order to fund a matching contribution, then there would be no actuarial impact on the system.

**According to ERS, the provisions and recommendations in the bill should not have an actuarial impact on ERS.

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