24-7-406. Retirement fund assets accounts — Members' deposit account — Contributions.

24-7-406. Retirement fund assets accounts — Members' deposit account — Contributions. (a)(1) The members' deposit account is the account: (A) In which member contributions are accumulated; (B) From which member refunds of contributions are paid; and (C) From which transfers are made as provided in this act. (2) Employer contributions that are paid by an employee instead of an employer shall be: (A) Credited to the members' deposit account; and (B) Subject to refund under the same conditions that regular member contributions are refunded. (3) In the event survivor benefits become payable on account of the death of a member, his or her accumulated contributions standing to his or her credit in the members' deposit account shall be transferred to the survivor benefit account. (b)(1) Except as provided otherwise in this section, the contributions of a member to the Arkansas Teacher Retirement System shall be the amounts set forth in this subsection. (2)(A) Each member who first became a member July 1, 1971, or later shall contribute to the system six percent (6%) of his or her salary for all salary earned on or before June 30, 2013. (B) Beginning July 1, 2013, each member who first became a member July 1, 1971, or later shall contribute to the system the percentage of his or her salary set by the Board of Trustees of the Arkansas Teacher Retirement System under subdivision (b)(8) of this section. (3) Member contributions before July 1, 1969, shall be in accordance with provisions in force before July 1, 1969. (4)(A) For each member who first became a member before July 1, 1971, member contributions for the period after June 30, 1969, shall be six percent (6%) of the first seven thousand eight hundred dollars ($7,800) of his or her annual salary through June 30, 2013, unless he or she shall have elected, in accordance with rules and regulations established by the Board of Trustees of the Arkansas Teacher Retirement System, to contribute six percent (6%) of his or her full salary for the period after June 30, 1969, through June 30, 2013. (B) Beginning July 1, 2013, each member who first became a member before July 1, 1971, shall contribute to the system the percentage of salary set by the board under subdivision (b)(8) of this section on the first seven thousand eight hundred dollars ($7,800) of his or her annual salary unless he or she elects to contribute a percentage of his or her entire salary, in accordance with the rules established by the board. (C) If the election is made before July 1, 1984, the member shall contribute to the system the difference between full salary member contributions and member contributions based on seven thousand eight hundred dollars ($7,800) annual covered salary retroactive to July 1, 1969, or to the actual date of employment, whichever is later, by paying the actuarial equivalent of the member's benefits to the system. (D) If the election is made July 1, 1984, or later, the member shall contribute to the system both the added member contributions and the added employer contributions that would have been paid to the system if the member's full salary always had been covered by paying the actuarial equivalent of the member's benefits to the system. (E) The interest and added employer contributions shall be considered member contributions for purposes of the system. However, any former active member who returns to covered employment on or after July 1, 1995, and who elects to make contributions to the system, shall contribute on his or her full salary. (5) Members who leave covered employment and who had annual compensation of seven thousand eight hundred dollars ($7,800) or less shall have, upon their return to covered employment, full salary considered for purposes of the system. (6) Contributions shall be required on all salary earned in covered employment during the fiscal year in which membership begins. (7) The member contribution rate shall be six percent (6%) unless increased by the board. (8)(A) Subject to the limitations under subdivision (b)(8)(D) of this section, the board may set the member contribution rate at no less than six percent (6%) and may increase the member contribution rate to maintain actuarial soundness. (B) An increase or decrease in a member contribution rate shall: (i) Apply to a complete fiscal year; and (ii) Remain in effect until modified by the board. (C) The board may adopt a change in the member contribution rate by resolution at any board meeting to apply to subsequent fiscal years until changed. (D) The board shall not increase the member contribution rate unless the: (i) System's actuary certifies to the board that the amortization period to pay the unfunded liabilities of the system exceeds eighteen (18) years; and (ii) Board determines that an increase in the member contribution rate is prudent to maintain actuarial soundness. (c)(1)(A) Each employer shall deduct the member contributions provided for in this section from the salary of each member on every payroll, for every payroll period, from the date of his or her entrance into the system until the member retires or terminates, and the employer shall remit the contributions to the system. (B)(i) Before July 1, 2011, if the employer fails to report the required service of a member and remit the contributions to the system, the system shall have the right to collect from the employee and the employer the contributions due, if any, from each, together with interest beginning with the subsequent fiscal year if the unreported service is within the look-back period under § 24-7-205. (ii) If the unreported service is not within the look-back period, the unreported required service shall be considered an optional purchase of service and the actuarial equivalent of the member's benefits due to the system shall be required by the member. (iii) A member shall not be given credit for service rendered until all service is paid in full. (2) The member's contributions provided for in this section shall be made notwithstanding that the minimum salary provided by law for any member shall be thereby changed. (3)(A) Each member shall be deemed to consent and agree to the deductions made and provided for in this section. (B) Payment of his or her salary less the deductions shall be a full and complete discharge and acquittance of all claims and demands whatsoever for the services rendered by the member during the period covered by the payment, except as to benefits provided by the system. (4) The members' contributions, so deducted from their salaries, shall be remitted to the system in such manner and form and into such frequency and shall be accompanied by such supporting data as the board shall prescribe from time to time. (d)(1) In addition to the contributions deducted from the salaries of a member, as provided in this section, a member may restore contributory, noncontributory, and any other service credit forfeited in a member termination refund by paying the actuarial equivalent of the member's benefits. (2) A member shall not be given credit for service rendered before the date the member received a refund of contributions until the member returns to the system all amounts due from the member. (e)(1)(A) Effective July 1, 1999, an active member shall: (i) Elect to become a contributory or noncontributory member of the system as provided for in this section; and (ii) File a written election with the system in accordance with the rules adopted by the board. (B)(i) The election of the member: (a) Is irrevocable; and (b) Shall be made on or before July 1, 2000. (ii) If a member does not make an election, then the status of the member on June 30, 2000: (a) Remains in effect; (b) Is irrevocable. (iii) The election of a member to become a contributory or noncontributory member of the system: (a) Applies only to the future salaries of a member of the system; (b) Does not alter the contribution requirements of a member; and (c) Does not alter the status of member contributions that existed before the election. (iv) An active member who previously elected to become a noncontributory member of the system may change credited service on which a member contribution has not been paid to contributory credited service by paying the system the actuarial equivalent of the member benefits. (v) If a member previously made contributions to only the first seven thousand eight hundred dollars ($7,800) of his or her annual salary, then the member cannot contribute on a full future salary until the member makes additional contributions to previous full salaries as provided under this section. (C)(i) Effective July 1, 2005, an active member whose status later changes from a nonteacher status to an administrator or teacher status under contract for one hundred eighty-one (181) days or more shall become a contributory member of the system otherwise provided for in this section regardless of an earlier election to be a noncontributory member of the system. (ii)(a) From July 1, 2005, to June 30, 2007, an active member who has previously elected to be a noncontributory member of the system may make an irrevocable election to become a contributory member of the system. (b) If the election is made before the preparation of the first salary payment to the member in the fiscal year, the election is effective immediately. (c) If the election is made after the preparation of the first payroll containing the first salary payment to the member in the fiscal year, the election is effective July 1 of the next fiscal year. (D) On and after July 1, 2007, an active member who has previously been a noncontributory member of the system, by election or otherwise, may make an irrevocable election to become a contributory member of the system under this section. (2)(A)(i) Effective July 1, 1999, an inactive member who reenters the system shall elect to become a contributory or noncontributory member of the system within one (1) year of the effective date that the member is considered an active member of the system. (ii) The election is effective the earlier of the: (a) Preparation of the payroll containing the first salary payment upon the reentry of the member into the system; or (b) July 1 immediately following the date the election is filed with the system. (iii) If the member does not make an election within one (1) year, then the status of the member before the member reentered the system remains in effect. (B) Effective July 1, 2007, an inactive member who becomes an active member of the system shall reenter as a contributory member of the system if the member was contributory when he or she first entered the inactive status. (C) Effective July 1, 2007, an inactive member or a rescinding retiree who reenters the system may make an irrevocable election to become a contributory member of the system under this section at the time of his or her reemployment regardless of his or her previous noncontributory status. (D) If the election is made: (i) Before the preparation of the first salary payment to the member in the fiscal year, the election is effective immediately; and (ii) After the preparation of the first payroll containing the first salary payment to the member in the fiscal year, the election is effective July 1 of the next fiscal year. (3)(A) Effective July 1, 1999, a new member shall be a contributory member of the system.(B) From July 1, 1999, to June 30, 2007, a new member who is under contract with a covered employer for one hundred eighty (180) days or less shall have one (1) year to make an irrevocable election to become a contributory member of the system. (C) From July 1, 1999, to June 30, 2007, a new member who is not under contract with a covered employer shall not become a contributory member of the system. (D)(i) Effective July 1, 2007, a new member under contract with a covered employer for one hundred eighty-one (181) days or more shall be a contributory member of the system. (ii) A new member under contract with a covered employer for one hundred eighty (180) days or less may make an irrevocable election to become a contributory member of the system. (iii) A new member not under contract with a covered employer may make an irrevocable election to become a contributory member of the system under this section. (4)(A) The board may exclude the participation of a member under this subsection if the board determines that the contributions of a member may not be treated as employer contributions under the: (i) Internal Revenue Code, 26 U.S.C. § 1 et seq.; or (ii) Income Tax Act of 1929, § 26-51-101 et seq. (B) The board shall interpret this subsection in a manner that is consistent with the requirements of the: (i) Internal Revenue Code; and (ii) Applicable United States Department of the Treasury regulations under the Internal Revenue Code, 26 U.S.C. § 401(a). (f)(1) Employees who are eligible for membership in the system under § 24-7-202, who are or have been erroneously enrolled in the Arkansas Public Employees' Retirement System, whose membership in that system is cancelled, and whose employee or employer contributions are refunded by that system under §§ 24-2-301 — 24-2-305, shall make member contributions to the system as provided in subdivision (b)(2) of this section. (2) If such an employee becomes an active member of the contributory plan of this system, he or she may establish contributory service credit for all or part of his or her service that is cancelled by the system by paying the actuarial equivalent of the member's benefits to the system. (g)(1)(A) Each employer shall pay the member contributions under this section from the salary earned by a member after June 30, 1997, and those contributions shall then be treated as employer contributions in determining tax treatment under the provisions of the Internal Revenue Code, 26 U.S.C. § 1 et seq., and the Income Tax Act of 1929, § 26-51-101 et seq. (B) For service purchase accounts established before July 1, 2011, that have an irrevocable payroll authorization established before July 1, 2012, or for accounts established by the system to allow a member to make payments on unreported or incorrectly reported contributory service, a member may elect to establish past service through payroll deductions, and the employer shall pay the amount required to establish the past service from the employee's salary earned after the employee signs an irrevocable payroll authorization prescribed by the board, and those payments shall then be treated as employer contributions in determining tax treatment under the Internal Revenue Code, 26 U.S.C. § 1 et seq., as it existed on January 1, 2011, and the Income Tax Act of 1929, § 26-51-101 et seq. (2) Each employer shall continue to withhold federal and state income taxes based upon those contributions as income of the member until the Internal Revenue Service or the federal courts rule that, pursuant to the Internal Revenue Code, 26 U.S.C. § 414(h), the contributions shall not be included as gross income of the member until they are distributed or made available to the member. (3) The employer shall pay these member contributions from the same source of funds used in paying the salary to the member. The employer may pay these contributions by a reduction in the cash salary of the member, by a setoff against future salary increases, or by a combination of a reduction in salary and a setoff against future salary increases. (4) If member contributions are paid by the employer as provided under this subsection, they shall be treated for all purposes of the system in the same manner and to the same extent possible as member contributions made prior to the date the employer began payment of the member's contributions hereunder. (5) Whenever member contributions are required to be paid by the employer under this subsection, the employee shall not have the option of choosing to receive the contributed amounts directly instead of having them paid by the employer.