I MINA'TRENTAI UNU NA LIHESLATURAN GUAHAN

Transcription

1 I MINA'TRENTAI UNU NA LIHESLATURAN GUAHAN 2012 (SECOND) REGULAR SESSION Bill No. f/s;?-3/(!o/z-) Introduced by: AN ACT TO ADD A NEW ARTICLE 5 TO TITLE 4 GUAM CODE ANNOTATED, CHAPTER 8 RELATIVE TO THE CREATION OF A HYBRID RETIREMENT SYSTEM; AND TO AMEND SECTION 8122(b) AND SECTION 8129 (a) OF 2 ARTICLE 1, TITLE 4 GUAM CODE ANNOTATED, CHAPTER -~ ~. 8 RELATIVE TO ANNUAL INCREASES IN ANNUITIES AND - TO ADD FIVE YEARS TO THE TIMEFRAME IN WHICH TO -,,,. co AMORTIZE THE GOVERNMENT OF GUAM'S REMAINING ;:.:, w LIABILITIES FOR DEFINED BENEFIT PLAN MEMBERS' PRIOR SERVICE. ''"-.) BE IT ENACTED BY THE PEOPLE OF GUAM; 1 SECTION 1. Legislative Findings and Intent. I Mina 'Trentai Unu Na 2 Liheslaturan Guahan finds that there are three separate retirement plans generally 3 available to Government of Guam employees: (a) employees employed on or 4 before September 30, 1995 were required to become members of the Retirement 5 Fund (Defined Benefit Plan) under Article 1, Chapter 8, Title 4 of the Guam Code 6 Annotated; (b) employees employed after September 30, 1995 were and remain 7 required to become participants in the Defined Contribution Retirement System 8 under Article 2, Chapter 8, Title 4 of the Guam Code Annotated; and ( c) all 9 employees, except those participating in a Government of Guam sponsored plan 1 o under Section 403(b) of the Internal Revenue Code, may voluntarily participate in ~~ - ~------~---- -~ ~- _''.; - -..:'.; - ::_:-: -::'--_:_: --, :.:_

2 _, 1 the Deferred Compensation Program under Article 3, Chapter 8, Title 4 of the 2 Guam Code Annotated. 3 I Mina 'Trentai Unu Na Liheslaturan Guahan further finds that the Defined 4 Contribution Retirement System was established in 1995 amid concerns and 5 findings by the Twenty-third Legislature that: 6 (a) The Actuarial Valuation of the Retirement [Defined Benefit] Plan 7 prepared by Deloitte & Touche as of September 30, 1993, expressed concern that 8 benefit levels are rather excessive in comparison to most other government 9 retirement systems; 1 O (b) Benefit levels and retirement policy should be reviewed and benefit 11 levels should be adjusted in order to address specific inequities, excessiveness, and 12 desired policy objectives; and 13 ( c) In establishing benefits for a new plan, generally accepted retirement 14 income levels standards should be observed and the details of any new plan must 15 be considered thoroughly and a comprehensive education and implementation plan 16 must be developed. 17 I Mina 'Trentai Unu Na Liheslaturan Guahan has continued to review 18 benefit levels and retirement policy in light of retirements of participants in the 19 Defined Contribution Retirement System, as well as the Defined Benefit Plan. The 20 review by I Mina 'Trentai Unu Na Liheslaturan Guahan involved consideration of 21 a comprehensive and detailed study by Milliman, Inc. of alternative retirement 22 plans and arrangements, based upon the Actuarial Valuation under the Defined 23 Benefit Plan as of September 30, 2008, and updated through September 30, The alternatives were prepared as part of an analysis of funding requirements and 25 retirement benefit levels of participants in the Defined Contribution Retirement 26 System and future government of Guam employees. 27 I Mina 'Trentai Unu Na Liheslaturan Guahan finds that the benefit levels of ,,,, ~---- ~,.-~,-=. ===~============-----~-~~~-~-,, ,,

3 1 retirees of the Defined Contribution Retirement System, including those who 2 voluntarily participate in the Deferred Compensation Program, have not been 3 sufficient to maintain their standards of living in retirement. 4 I Mina 'Trentai Unu Na Liheslaturan Guahan further finds that an alternative 5 retirement program that combines a defined benefit "floor" of benefits, along with 6 a salary reduction deferred compensation account program, is necessary to provide 7 a reasonable opportunity for government employees to maintain their standards of 8 living in retirement, while also balancing the government's budgetary needs and 9 obligations to active and retired government employees and their survivors. 10 I Mina 'Trentai Unu Na Liheslaturan Guahan further finds that this 11 combination of benefits under an alternative "Hybrid Retirement System" is 12 reasonable and prudent to balance the needs of government employees as well as 13 the government as a whole. 14 I Mina 'Trentai Unu Na Liheslaturan Guahan intends to establish a new 15 "Hybrid Retirement System" to be comprised of participation in: ( 1) the 16 preexisting Retirement Fund that shall provide for an unreduced retirement defined 17 benefit equal to 1.75% of an employee's average annual salary for each year of 18 credited service at retirement age 65; and (2) the preexisting Deferred 19 Compensation Plan providing for a required pre-tax salary reduction contribution 20 equal to one percent ( 1 %) of a member's base salary. 21 I Mina 'Trentai Unu Na Liheslaturan Guahan intends that the new "Hybrid 22 Retirement System" shall require mandatory participation by all new employees 23 hired after December 31, 2012, with voluntary participation in certain 24 circumstances by participants with interests in the Defined Contribution 25 Retirement System who elect to participate in, and, in certain circumstances, 26 transfer their account balances to, the "Hybrid Retirement System" in accordance 27 with regulations promulgated by the Board of Trustees of the Retirement Fund , -,

4 1 I Mina 'Trentai Unu Na Liheslaturan Guahan also reviewed the benefit 2 levels for retirees under the Defined Benefit Plan, and finds that the annual, 3 automatic "sliding scale" increases to basic retirement and disability annuities 4 remain static at levels set almost three decades ago by I Liheslaturan Guahan in 5 PublicLawNo :1. 6 I Mina 'Trentai Unu Na Liheslaturan Guahan intends to address, clarify, and 7 adjust the annual, automatic "sliding scale" increases to basic retirement and 8 disability annuities in 8122 and 8129 in this Chapter, Article 1 that were set in , to address desired policy objectives and remedy specific inequities. 1 O I Mina 'Trentai Unu Na Liheslaturan Guahan finds that the implementation 11 of this Act will require similar or lower retirement costs for new employees and 12 benefit the Government of Guam as a whole, but will increase the Government of 13 Guam's unfunded liability due to an increase in the "sliding scale" and also due to 14 members who will transfer from the Defined Contribution Retirement System to 15 the Hybrid Retirement System to the extent that the Defined Contribution account 16 balances are less than the actuarial accrued liability for the members who transfer. 17 I Mina 'Trentai Unu Na Liheslaturan Guahan intends that the resulting cost 18 increases shall be timely reflected in the employer contribution rate based on the 19 actuarial valuation report prepared for the Board of Trustees of the Retirement 20 Fund by the actuary appointed by the Board, and approved by I Liheslaturan 21 Guahan in accordance with 8137 in this Chapter, Article I Mina 'Trentai Unu Na Liheslaturan Guahan finds that due to the expected 23 increase in the unfunded liability resulting from this Act, a one-time five-year 24 extension of the amortization period for the unfunded liability is appropriate. 25 SECTION 2. New Hybrid Retirement System. A new Article 5, Title 4 26 Guam Code Annotated, Chapter 8 is hereby added to read as follows: 27 " Participation in the Hybrid Retirement System ~ ""-"... -~=--""-=-=-~ ~~

5 ~ (a) New Employees. With limited exceptions, new employees whose 2 employment commences on and after January 1, 2013 shall participate in the 3 Hybrid Retirement System. 4 (b) Former Employees Who Are Reemployed. 5 ( 1) Reemployed employees who have retired under government of Guam 6 sponsored plans are prohibited from participating in the Hybrid Retirement 7 System. All reemployed employees who retired under the Defined Benefit Plan, 8 the Defined Contribution Retirement System, or the Hybrid Retirement System are 9 required to participate in the Defined Contribution Retirement System. 10 (2) Reemployed employees who were members of the Defined Benefit Plan 11 and did not refund (withdraw) their employee contributions upon separation from 12 service shall resume membership in the Defined Benefit Plan. 13 (3) Reemployed employees with interests in the Defined Contribution 14 Retirement System shall participate in the Defined Contribution Retirement 15 System, unless such eligible employees timely elect to participate in the Hybrid 16 Retirement System (and in some cases, transfer their account balances) under the 17 following circumstances: 18 (i) Such eligible employees who are reemployed during the 19 "Eligibility Window" commencing on January 1, 2013 and ending on 20 September 30, 2013, may, during the "Election Window" commencing on 21 April 1, 2013, and ending on September 30, 2013 (October 31, 2013, for 22 reemployment commencing during the month of September 2013), elect to 23 participate in the Hybrid Retirement System and transfer their account 24 balances in the Defined Contribution Retirement System to the Retirement 25 Fund for credited service effective as of January 1, (ii) Such eligible employees who are reemployed after September 30, , may, within 30 days of their reemployment, elect to participate in the -5-,, ~

6 1 Hybrid Retirement System, but may not transfer their account balances in 2 the Defined Contribution Retirement System to the Retirement Fund for 3 credited service. 4 ( c) Disabled Participants Receiving Ancillary Benefits Under Article 4. 5 Disabled participants in the Defined Contribution Retirement System who are 6 receiving pre-retirement disability benefits under Title 4, Chapter 8, Article 4 of 7 the Guam Code Annotated during the "Eligibility Window" commencing on 8 January 1, 2013 and ending on September 30, 2013, may, during the "Election 9 Window" commencing on April 1, 2013 and ending on September 30, (October 31, 2013, for participants who commence receiving disability benefits 11 during the month of September 2013), elect to participate in the Hybrid Retirement 12 System, effective upon the termination of their disability benefits in connection 13 with their retirement or their reemployment with the Government of Guam, and 14 transfer their account balance in the Defined Contribution Retirement System to 15 the Retirement Fund for credited service. 16 (d) Current Employees. Employees participating in the Defined Contribution 17 Retirement System on December 31, 2012, may, during the "Election Window" 18 commencing on April 1, 2013 and ending on September 30, 2013, elect to 19 participate in the Hybrid Retirement System, and transfer their Defined 20 Contribution Retirement System account balances to the Retirement Fund 21 thereunder, effective as of January 1, If the participant's account has been 22 reduced by any withdrawal, the participant may repay the withdrawn amounts, plus 23 interest, in order to reinstate full credited service under the Hybrid Retirement 24 System Employee Contributions. 26 (a) Mandatory pre-tax employee contributions equal to 9.5% of the 27 member's base salary shall be made to the Retirement Fund and subject to the -6-

7 1 management and administration of the Retirement Fund under Article 1, Chapter 8, 2 Title 4, of the Guam Code Annotated. 3 (b) Mandatory pre-tax employee contributions equal to one percent ( 1 %) of 4 the member's base salary shall be made to the Deferred Compensation Program 5 and subject to the management and administration of the Deferred Compensation 6 Program under Article 3, Chapter 8, Title 4, of the Guam Code Annotated Employer Contributions. Employer contributions on behalf of 8 members under the Retirement Fund shall be in accordance with applicable 9 contribution requirements described in 8137 in this Chapter, Article 1, as 10 amended Member Retirement Benefits. 12 (a) The Retirement Fund shall provide a retirement annuity in an amount 13 equal to 1.75% of a member's average annual salary (the average of the highest 14 three annual base salaries, and where non-base compensation is excluded) for each 15 year of credited service (subject to a minimum $1,200 per year, and a maximum of 16 85% of average annual salary). The retirement annuity shall be subject to annual 17 increase based on specified fixed dollar increments. A member shall be eligible to 18 receive an unreduced retirement annuity at age 65 (where the maximum benefit of 19 85% of average annual salary is achieved with 49 years of credited service), and 20 shall be eligible to receive a reduced retirement annuity at age 55 and 25 years of 21 credited service (subject to a reduction of.5% per month for each month under 22 age 65). 23 (b) The Deferred Compensation Program shall provide a retirement benefit 24 equal to a member's account balance at the time of distribution, which account 25 balance may be paid in the form of annuity, installment, or lump sum payments as 26 may be elected by the member Survivor And Disability Benefits ,,,,,,

8 1 (a) Under the Retirement Fund, surv1vmg spouses shall be eligible for 2 survivor benefits equal to 60% of a member's retirement annuity (minimum $1,200 3 per year). Surviving minor children shall be eligible for surviving child benefits 4 equal to $2,880 per child (up to $14,400 in the aggregate). An additional lump 5 sum benefit of $1,000 also is available. The survivor annuity (but not annuity for 6 surviving minor children) shall be subject to annual increase based on specified 7 fixed dollar increments. 8 (b) Under the Retirement Fund, a member shall be eligible for a disability 9 retirement annuity equal to fifty percent (50o/o) of the member's average annual 10 salary. The disability annuity shall be subject to annual increase based on specified 11 fixed dollar increments Definitions. As used in this Article, unless the context otherwise 13 reqmres: 14 (a) Board of Trustees or Board means the Board of Trustees of the 15 government of Guam Retirement Fund, which is responsible for the direction and 16 operation of the affairs and business of the Hybrid Retirement System. 17 (b) Code means the United States Internal Revenue Code of 1986, 18 as amended, and corresponding references to the Guam Territorial Income Tax 19 Code, as may be appropriate. 20 ( c) Defined Contribution System means the government of Guam Defined 21 Contribution Retirement System established and operated in accordance with 22 Article 2 of this Chapter and inclusive of modifications in the terms and conditions 23 of the Defined Contribution Retirement System applicable to the members of the 24 Hybrid Retirement System under this Article ( d) Director means the Director of the Government of Guam Retirement 26 Fund as appointed by the Board in accordance with 8140 in this Chapter ~

9 1 ( e) Employer means each and every line department or agency of the 2 Executive Branch, every autonomous and semi-autonomous agency or 3 instrumentality, every public corporation, every educational institution, whether 4 secondary or post secondary, the Legislative Branch, the Judicial Branch, the 5 Public Defender Corporation and every public entity hereafter to be created by law, 6 within Guam which has employed or employs a member. 7 ( f) Existing Retirement System means the Government of Guam Retirement 8 Fund established and operated in accordance with Article 1 of this Chapter and 9 exclusive of modifications in the terms and conditions of the Existing Retirement 1 O System applicable to the members of the Hybrid Retirement System under this 11 Article (g) Hybrid Retirement System or Hybrid Plan means the Government of 13 Guam Hybrid Retirement System established and operated under this Article The Hybrid Retirement System shall consist of the mandated and coordinated 15 participation of members in two separate and preexisting retirement programs: (1) 16 the Retirement Fund established and maintained under Article 1, Chapter 8 of Title 17 4 of the Guam Code Annotated; inclusive of the modifications to the terms and 18 conditions of the Retirement Fund for Hybrid Plan members as set forth in this 19 Article 5; and (2) the Deferred Compensation Program established and maintained 20 under Article 3, Chapter 8 of Title 4 of the Guam Code Annotated. 21 (h) Member or Hybrid Plan member means any person who meets the 22 eligibility requirements for membership in the Hybrid Retirement System as 23 described in 8507 in this Chapter under this Article 5 and participates in the 24 Hybrid Retirement System. 25 (i) Retirement Fund means the Government of Guam Retirement Fund 26 established and operated in accordance with Article 1 of this Chapter and inclusive -- ~

10 1 of the modifications in the terms and conditions of the Existing Retirement System 2 applicable to members of the Hybrid Retirement System under this Article Establishment of the Government of Guam Hybrid Retirement 4 System; Membership in Hybrid Retirement System. 5 (a) Hybrid Retirement System. Beginning January 1, 2013, the Government 6 of Guam Hybrid Retirement System shall be established hereunder, which System 7 shall be comprised of membership under the Government of Guam Retirement 8 Fund established under Article 1 of this Title and the Deferred Compensation 9 Program established under Article 3 of this Title. The Hybrid Retirement System 10 does not comprise a separate fund or trust for members thereunder, but is the 11 coordinated dual participation on a mandatory basis at specified benefit levels in 12 both the Retirement Fund and the Deferred Compensation Program. Beginning 13 January 1, 2013, the Hybrid Retirement System shall be the single retirement 14 program for all new employees whose employment commences on or after that 15 date. No additional new employees shall be admitted to the Defined Contribution 16 Retirement System on or after such date, except as provided from time to time in 17 the Defined Contribution Retirement System. Members of the Defined 18 Contribution Retirement System whose employment continues beyond December 19 31, 2013, shall continue to contribute to and participate in the Defined 20 Contribution Retirement System without change in provisions or benefits, except 21 for members who elect to become Hybrid Plan members pursuant to 8507(b) in 22 this Chapter under this Article 5 or as provided from time to time under the 23 Defined Contribution Retirement System. 24 (b) Membership in Retirement Fund 25 (1) New Employees. All new employees whose employment commences on 26 or after January 1, 2013, and who satisfy the eligibility requirements for 27 membership under 8105 and 8106 in this Chapter, Article 1 shall participate in _, -,,, ,,,

11 1 the Retirement Fund as "Hybrid Plan members" in accordance with such eligibility 2 requirements. No additional new employees shall be admitted to the Existing 3 Retirement System or the Defined Contribution System on or after January 1, , except as provided hereunder or provided from time to time under the 5 Existing Retirement System or the Defined Contribution System, respectively. 6 Members of the Existing Retirement System whose employment continues beyond 7 December 31, 2012, shall continue to contribute and participate in the Existing 8 Retirement System without change in provisions or benefits, except as provided 9 from time to time under the Existing Retirement System. Except for those 1 O members who elect to participate in the Hybrid Retirement System pursuant to (b)(2) m this Chapter under this Article 5 members of the 12 Defined Contribution System whose employment continues beyond December 31, , shall continue to contribute and participate in the Defined Contribution 14 System without change in provisions or benefits, except as provided from time to 15 time under the Defined Contribution System. 16 (2) Hybrid Plan Election by Current Employees in Defined Contribution 17 System. All employees who are members in the Defined Contribution System on 18 December 31, 2012, shall be eligible to elect on a voluntary basis to become 19 Hybrid Plan members effective as of January 1, 2014, and to terminate active 20 participation in the Defined Contribution System as of such date, by making the 21 appropriate election with the Hybrid Retirement System in the form and manner as 22 determined by the Board during the election period commencing on April 1, 2013, 23 and ending on September 30, After having made such election to become a 24 Hybrid Plan member, the member may not change such election or again become 25 an active member of the Defined Contribution System. The failure to make such 26 election shall be deemed to constitute an election by the member to remain as an 27 active member under the Defined Contribution System. Such election shall not -11- _,_ -~ '---~,

12 1 apply to members in the Defined Contribution System who have retired or 2 otherwise terminated employment from government service and who are not 3 employed by the Government of Guam at the time of the election and as of the 4 January 1, 2014, effective date of participation in the Hybrid Plan. 5 (3) Reemployment of Existing Retirement System Member. Any employee 6 who is a member in the Existing Retirement System, who leaves government 7 service and who is later reemployed after December 31, 2012, by the Government 8 of Guam, shall become an active member in the Existing Retirement System upon 9 reemployment if such employee has not received a refund of contributions 10 resulting in ineligibility for membership under 8130(b) in this Chapter, Article 1 11 and if such employee otherwise meets the eligibility requirements under the 12 Existing Retirement System. However, if such employee has received a refund of 13 contributions under 8130 in this Chapter, Article 1 and if such employee 14 otherwise meets the eligibility requirements for membership under 8105 and in this Chapter, Article 1 then such employee shall become an active 16 member in the Hybrid Retirement System upon reemployment. 17 (4) Reemployment of Defined Contribution System Member. 18 Any employee who 1s a member maintaining an interest m the 19 Defined Contribution System, who leaves government service and who is later 20 reemployed after December 31, 2012, by the Government of Guam, shall become 21 an active member in the Defined Contribution System upon reemployment if such 22 employee otherwise meets the eligibility requirements under the Defined 23 Contribution System. However, if such a member is reemployed during the period 24 commencing on January 1, 2013, and ending on September 30, 2013, then: 25 (i) the member shall be eligible to elect on a voluntary basis to 26 become a member of the Hybrid Plan if such member otherwise meets the ,_,, - "'-"'''~-;.&,..,-'=========~=====~-===-=-=--=-=-=-=-=--=-= =--= --=--~~~-~~--

13 1 eligibility requirements for membership under 8105 and 8106 m this 2 Chapter; 3 (ii) the election period for this election shall be the period 4 commencing on April 1, 2013, and ending on September 30, 2013 (or 5 October 31, 2013, for members reemployed during the month of September ), and the effective date of the member's membership in the Hybrid 7 Plan shall be January 1, 2014; and 8 (iii) the member's account under the Defined Contribution System 9 shall be subject to transfer to the Retirement Fund in accordance with 1 O Section 8508( d) in this Chapter under this Article Further, if such a member is reemployed after September 30, 2013: 12 (iv) the member shall be eligible to elect on a voluntary basis to 13 become a member of the Hybrid Plan if such member otherwise meets the 14 eligibility requirements for membership under 8105 and 8106 in this 15 Chapter, Article (v) the election period for such election shall be the thirty (30)-day 17 period beginning on the date of reemployment, and the effective date of the 18 member's membership in the Hybrid Plan shall be the date of reemployment; 19 and 20 (vi) the member's account under the Defined Contribution System 21 shall not be subject to transfer to the Retirement Fund. 22 (5) Reemployment of Defined Contribution System Member on Disability. 23 Notwithstanding the above 8507(b)(4) in this Chapter under this Article 5 a 24 member of the Defined Contribution System who had incurred a disability and at 25 any time been eligible to receive any benefits provided under any long-term 26 disability insurance policy issued pursuant to 8213 in this Chapter, Article 2 shall 27 not be eligible for membership under the Hybrid Retirement System upon , ,_~ ~---~~----, -~ ,..--~----_--_.

14 1 reemployment, but such member who satisfies the eligibility requirements for 2 membership under 8206 and 8207 in this Chapter, Article 2 at such time shall 3 participate in the Defined Contribution System in accordance with such eligibility 4 requirements. 5 However, in the case of a member of the Defined Contribution System who 6 is receiving disability benefits under 8213 in this Chapter, Article 2 during the 7 period commencing January 1, 2013, and ending on September 30, 2013, such 8 member shall be eligible to elect on a voluntary basis to become a member of the 9 Hybrid Plan in the event of the member's reemployment or retirement on or after 10 January 1, For this purpose, the election period for this election shall be the period 12 commencing on April 1, 2013, and ending on September 30, 2013 (or October 31, , for members who commence receiving disability benefits during the month 14 of September 2013), and the effective date of the member's membership in the 15 Hybrid Plan shall be the later of: 16 (i) January 1, 2014, or 17 (ii) the date of the member's reemployment or retirement. 18 ( 6) Reemployment of Government of Guam Retiree. Any employee who 19 retired under the Existing Retirement System, the Defined Contribution System, or 20 the Hybrid Retirement System, shall participate in the Defined Contribution Plan 21 upon reemployment. 22 ( c) Membership in Deferred Compensation Program. Hybrid Plan members 23 shall participate in the Deferred Compensation Program effective as of the date on 24 which they commence participation in the Retirement Fund. 25 ( d) Membership in Welfare Benefit Plans. Hybrid Plan members shall not 26 be eligible to participate in the welfare benefit plans established and maintained 27 under Article 4 of 4GCA. As such, members of the Defined Contribution System -14-

15 1 who elect to become Hybrid Plan members pursuant to 8507(b) in this Chapter, 2 under this Article 5 shall terminate participation in such welfare benefit plans 3 effective as of the date on which they commence participation in the Hybrid 4 Retirement System. 5 (e) Applicability of Articles 1-3 of 4GCA, Chapter 8. Except as otherwise 6 provided hereunder, with respect to Hybrid Plan members who participate in the 7 Retirement Fund, Defined Contribution System, and Deferred Compensation 8 Program in accordance with the Hybrid Retirement System provisions under this 9 Article 5, the provisions of Articles 1-3 of 4GCA Chapter 8, respectively, shall be 10 applicable to Hybrid Plan members in a manner no different than the application to 11 members who are not Hybrid Plan members Hybrid Plan Member Basic Retirement Annuity. 13 (a) Amount of Basic Retirement Annuity. Notwithstanding the otherwise 14 applicable formula under 8122 of 4GCA in this Chapter, Article 1 or other 15 successor provision, the basic retirement annuity payable to a Hybrid Plan member 16 under the Retirement Fund shall be the following: 17 (1) an amount equal to one and three quarters percent ( 1. 75%) of average 18 annual salary for each year of credited service; 19 (2) no basic retirement annuity shall exceed eighty-five percent (85%) of 20 average annual salary; and 21 (3) the basic retirement annuity shall not, in any case, be less than 22 One Thousand Two Hundred Dollars ($1,200) per year per member. 23 For purposes of defining "salary" and "average annual salary" under (i) and 8104G) in this Chapter, Article 1 with respect to the determination 25 of the basic retirement annuity payable to a Hybrid Plan member, the term "salary" 26 shall mean the member's base salary excluding all non-base compensation , ,, ~

16 1 (b) Automatic Increases in Annuity for Basic Retirement Annuity. 2 Any Hybrid Plan member receiving a basic retirement annuity under the 3 Retirement Fund shall receive each year on the anniversary date of the member's 4 retirement or entitlement, an automatic "sliding scale" increase in the member's 5 annual annuity as applicable under the Retirement Fund pursuant to 8122 in this 6 Chapter, Article lor other successor provision. 7 ( c) Retirement. Notwithstanding the otherwise applicable retirement 8 requirements under 8119 and in this Chapter, Article 1 or other successor 9 provisions, a Hybrid Plan member may retire on a service retirement annuity under 1 O the Retirement Fund, upon written application to and approval by the Board; 11 provided that such member shall have attained at least sixty-five (65) years of age 12 and has completed five (5) years of service. However, at the option of the Hybrid 13 Plan member, whether active or inactive, such member may retire after 14 (1) attaining at least fifty-five (55) years of age and 15 (2) completing twenty-five (25) years of service, m which case the 16 retirement annuity for such member shall be reduced one half (1/2) of one percent 17 (1 %) for each month such member is under the age of sixty-five (65) years at such 18 time of retirement, from the amount of the retirement annuity determined for such 19 member as of his attainment of age sixty-five ( 65). 20 ( d) Credited Service for Transfers from Defined Contribution System. 21 ( 1) Transfer of Account. With respect to a member in the 22 Defined Contribution Retirement System who elects to be a member in the 23 Hybrid Retirement System effective as of January 1, 2014, in accordance with the 24 election procedures under Section 8507(b )(2) in this Chapter under this Article 5 25 the member's current account balance under the Defined Contribution System shall 26 be transferred to the Retirement Fund effective as of January 1, Further, 27 with respect to a member in the Defined Contribution Retirement System who is -16-

17 1 reemployed during the period commencmg January 1, 2013, and ending on 2 September 30, 2013, by the Government of Guam and who becomes a member in 3 the Hybrid Retirement System effective as of January 1, 2014, following 4 reemployment in accordance with Section 8507(b )( 4), the member's current 5 account balance under the Defined Contribution System shall be transferred to the 6 Retirement Fund effective as of January 1, Finally, with respect to a member 7 in the Defined Contribution Retirement System who is receiving disability benefits 8 and who becomes a member in the Hybrid Retirement System upon reemployment 9 or retirement in accordance with Section 8507(b)(5) in this Chapter under this 10 Article 5, the member's account balance under the Defined Contribution System 11 shall be transferred to the Retirement Fund effective as of the effective date of the 12 member's membership in the Hybrid Plan as described in Section 8507(b)(5) in this 13 Chapter under this Article 5. In these cases, as of the effective date of the transfer 14 of a member's account from the Defined Contribution System to the Hybrid 15 Retirement System, such member's membership in the Defined Contribution 16 System shall terminate. The transfer of a member's account under this Section ( d)( 1) in this Chapter under this Article 5 shall apply to the portion of the 18 member's account attributable to member contributions pursuant to 8208 in this 19 Chapter, Article 2, employer contributions pursuant to 8209 in this Chapter, 20 Article 2 (whether the account reflecting such employer contributions are vested or 21 unvested, and inclusive of unvested suspense accounts), and the transfer of the 22 member's Member's Contribution Reserve and Employer's Contribution Reserve 23 pursuant to Any Ancillary Benefit Account maintained under the 24 Defined Contribution System on behalf of the member as described in 8201(n) of 25 4GCA, Chapter 8, Article 2 shall not be subject to transfer to the Retirement Fund. 26 (2) Defined Contribution System Credited Service. Effective as of the 27 effective date of the transfer of the member's account from the Defined ~, -,_,, ~~ ~ -~-~ , --

18 1 Contribution System to the Retirement Fund under this 8508( d), the service for 2 which the member's account is credited with employer contributions under the 3 Defined Contribution System (including the service under the Retirement Fund 4 attributable to the employee contributions previously transferred from the 5 Retirement Fund to the Defined Contribution System pursuant to the member's 6 election under 8207 in this Chapter, Article 2), shall be credited to the member 7 for purposes of determining the member's years of credited service and basic 8 retirement annuity under the Retirement Fund in accordance with 8508 in this 9 Chapter under this Article. 1 O (3) Credited Service for Repayment of Defined Contribution System 11 Contributions. In the event that the Hybrid Plan member's account under the 12 Defined Contribution System was previously reduced by the member's withdrawal 13 of an amount from the member's account that is attributable to contributions during 14 the member's active participation in the Defined Contribution System, the member 15 shall be allowed to repay to the Retirement Fund the amount of the withdrawal, 16 adjusted for interest during the period commencing on the date of the withdrawal 17 and ending on the date of the repayment, which repayment must be made in a 18 single payment or installments to the Retirement Fund in accordance with the Title 19 2, Division 1, Chapter 3, Article 1, of the Guam Administrative Rules, as amended. 20 If such withdrawn portion of the member's account is not repaid to the Retirement 21 Fund, the service that would otherwise be credited under the Retirement Fund for 22 service during the member's active participation in the Defined Contribution 23 System shall be reduced to account for the service to which the withdrawal relates 24 in accordance with rules, regulations, and procedures as approved by the Board. 25 ( 4) Credited Service for Repayment of Prior Retirement Fund Contributions. 26 In the event that the member's account under the Defined Contribution System was 27 previously reduced by the member's withdrawal of an amount from the member's , - ~---- ~-,,,;-,.,,;oe..f,;=='-'>-=--' ~ ~ :_--~::-- -= ~~~ ~

19 1 account that is attributable to the prior transfer of employee contributions from the 2 Retirement Fund to the Defined Contribution System (specifically, considering 3 only the portion of the account derived from the transferred Member's Contribution 4 Reserve, and not the Employer Contribution Reserve) pursuant to the member's 5 election under 8207 of 4GCA, Chapter 8, Article 2, the member shall be allowed 6 to repay to the Retirement Fund the amount of the withdrawal, adjusted for interest 7 during the period commencing on the date of the withdrawal and ending on the 8 date of the repayment, which repayment must be made in a single payment or 9 installments to the Retirement Fund in accordance with the Title 2, Division 1, 10 Chapter 3, Article 1, of the Guam Administrative Rules, as amended. If such 11 withdrawn portion of the member's account is not repaid to the Retirement Fund, 12 the service that would otherwise be credited under the Retirement Fund for service 13 during the member's prior participation in the Retirement Fund shall be reduced to 14 account for the service to which the withdrawal relates in accordance with rules, 15 regulations, and procedures as may be approved by the Board Hybrid Plan Member Disability Retirement Annuity. 17 (a) Amount of Disability Retirement Annuity. Notwithstanding the 18 otherwise applicable formula under 8125 in this Chapter, Article 1 or other 19 successor provision, the amount of basic disability retirement annuity for a Hybrid 20 Plan member under the Retirement Fund shall be fifty percent (50%) of average 21 annual salary based on the average three (3) highest annual salaries received the 22 member during that member's years of credited service. For purposes of defining 23 "salary" and "average annual salary" under 8104(i) and 8104 Q) in this Chapter, 24 Article 1 respectively, with respect to the determination of the basic disability 25 retirement annuity payable to a Hybrid Plan member, the term "salary" shall mean 26 the member's base salary excluding all non-base compensation. ---~ ~-, ~ ,=---~-~-==-~~---

20 1 (b) Automatic Increases in Annuity for Disability Retirement Annuity. 2 Any Hybrid Plan member receiving a recomputed disability retirement annuity 3 under the Retirement Fund shall receive each year on the anniversary date of the 4 member's retirement or entitlement, an automatic sliding scale increase in the 5 member's annual basic disability retirement annuity as applicable under the 6 Retirement Fund pursuant to 8129 in this Chapter, Article 1 or other successor 7 prov1s1on Hybrid Plan Member Death and Survivors Benefits. The death 9 benefit and survivor annuity provisions in connection with a member's death under in this Chapter, Article 1 or other successor provisions shall be 11 applicable to Hybrid Plan members in a manner no different than the application to 12 members who are not Hybrid Plan members Hybrid Plan Member Contributions to Fund. The member 14 contribution provisions under Section 8136 or other successor provision shall be 15 applicable to Hybrid Plan members in a manner no different than the application to 16 members who are not Hybrid Plan members. However, notwithstanding that the 17 contributions by Hybrid Plan members are designated as member contributions and 18 shall be administered as member contributions under 8136 in this Chapter, Article 19 1, such contributions shall be on a mandatory basis deducted from the member's 20 base salary and paid by the employer in lieu of contributions by the member, and 21 shall constitute pre-tax "pick-up" employer contributions for purposes of 22 determining the income tax treatment of such contributions under Section 414(h) 23 of the United States Internal Revenue Code. 24 Section Deferred Compensation Program. In accordance with in this Chapter, Article 3 the employer shall deduct and credit Hybrid Plan 26 member contributions under the Deferred Compensation Program in an amount 27 equal to one percent ( 1 %) of the member's base salary. However, notwithstanding

21 1 that the contributions by Hybrid Plan members are designated and shall be 2 administered as member contributions under Section 8306, such contributions shall 3 be on a mandatory basis deducted from the member's base salary and paid by the 4 employer in lieu of contributions by the member, and shall constitute pre-tax "pick- 5 up" employer contributions for purposes of determining the income tax treatment 6 of such contributions under Section 414(h) of the United States Internal Revenue 7 Code." 8 SECTION 3. Rules and Regulations. No later than December 31, 2012, 9 the Board of Trustees of the Retirement Fund shall approve such plan documents, 1 O rules, regulations, administrative procedures and forms at it may deem necessary 11 and appropriate to implement the Hybrid Retirement System under this Article SECTION 4. Section 8122(b) Title 4 Guam Code Annotated, Chapter 8, 13 Article 1, is hereby amended to read as follows: 14 " 8122(b) Automatic Increases in Annuity. Any member receiving a 15 basic retirement annuity and entitled to benefits under this Chapter shall 16 receive each year on the anniversary date of the member's retirement or 17 entitlement, an automatic 'sliding scale' increase in the member's annual 18 annuity, to be computed as follows: 19 (1) members receiving an annual annuity of Three Thousand Five 20 Hundred Dollars ($3,500.00) or less shall receive an automatic annual 21 increase of Six Hundred Dollars ($600.00) before October 1, 2012; after 22 September 30, 2012, members receiving an annual annuity of Six Thousand 23 Five Hundred Dollars ($6,500.00) or less shall receive an automatic annual 24 increase of Seven Hundred Fifty Dollars ($750.00); 25 (2) members receiving an annual annuity of more than Three 26 Thousand Five Hundred Dollars ($3,500.00), but not more than Six 27 Thousand Three Hundred Dollars ($6,300.00) shall receive an automatic ~ ~========-=~=-=-==~--~--~- -~=.o ~~

22 1 annual increase of Four Hundred Dollars ($400.00) before October 1, 2012; 2 after September 30, 2012, members receiving an annual annuity of more 3 than Six Thousand Five Hundred Dollars ($6,500.00), but not more than 4 Thirteen Thousand Dollars ($13,000.00), shall receive an automatic annual 5 increase of Six Hundred Dollars ($600.00); 6 (3) members receiving an annual annuity of more than Six Thousand 7 Three Hundred Dollars ($6,300.00), but not more than Ten Thousand One 8 Hundred Dollars ($10, ), shall receive an automatic annual increase of 9 Three Hundred Dollars ($300.00) before October 1, 2012; after September 10 30, 2012, members receiving an annual annuity of more than Thirteen 11 Thousand Dollars ($13,000.00), but not more than Nineteen Thousand Five 12 Hundred Dollars ($19,500.00), shall receive an automatic annual increase of 13 Four Hundred Fifty Dollars ($450.00); end 14 (4) members receiving an annual annuity of more than Ten Thousand 15 One Hundred Dollars ($10,100.00) shall receive an automatic annual 16 increase of Two Hundred Dollars ($200.00) before October 1, 2012; after 17 September 30, 2012, members receiving an annual annuity of more than 18 Nineteen Thousand Five Hundred Dollars ($19,500.00), but not more than 19 Twenty-Five Thousand Dollars ($25,000.00), shall receive an automatic 20 annual increase of Three Hundred Fifty Dollars ($350.00); and 21 (5) after September 30, 2012, members receiving an annual annuity 22 of more than Twenty-Five Thousand Dollars ($25,000) shall receive an 23 automatic annual increase of Two Hundred Fifty Dollars ($250.00)." 24 SECTION 5. Section 8129(a) Title 4 Guam Code Annotated, Chapter 8, 25 Article 1 is hereby amended to read as follows: 26 " Same: Automatic Increases in and Additions to 27 Recomputed Annuities ~

23 1 (a) The recomputed disability retirement annuity set forth in of this Chapter shall be subject to any of the following applicable fleft- 3 cumulative additions: 4 (1) disability retirement annuitants receiving an annual annuity of 5 Three Thousand Dollars ($3,000.00) or less shall receive an automatic 6 annual increase of Three Hundred Dollars ($300.00) before October 1, 2012; 7 after September 30, 2012, disability retirement annuitants receiving an 8 annual annuity of Six Thousand Five Hundred Dollars ($6,500.00) or less 9 shall receive an automatic annual increase of Three Hundred Seventy-Five 10 Dollars ($375.00); 11 (2) disability retirement annuitants receiving an annual annuity of 12 more than Three Thousand Dollars ($3,000.00), but not more than Six 13 Thousand Dollars ($6,000.00) shall receive an automatic annual increase of 14 Two Hundred Fifty Dollars ($250.00) before October 1, 2012; after 15 September 30, 2012, disability retirement annuitants receiving an annual 16 annuity of more than Six Thousand Five Hundred Dollars ($6,500.00), but 17 not more than Thirteen Thousand Dollars ($13,000.00) shall receive an 18 automatic annual increase of Three Hundred Dollars ($300.00); 19 (3) disability retirement annuitants receiving an annual annuity of 20 more than Six Thousand Dollars ($6,000.00), but not more than Ten 21 Thousand Dollars ($10,000.00), shall receive an automatic annual increase 22 of Two Hundred Dollars ($200.00) before October 1, 2012; after September 23 30, 2012, disability retirement annuitants receiving an annual annuity of 24 more than Thirteen Thousand Dollars ($13,000.00), but not more than 25 Nineteen Thousand Five Hundred Dollars ($19,500.00), shall receive an 26 automatic annual increase of Two Hundred Twenty-Five Dollars ($225.00); 27 and -23-

24 1 ( 4) disability retirement annuitants receiving an annual annuity of 2 more than Ten Thousand Dollars ($10,000.00)_shall receive an automatic 3 annual increase of One Hundred Dollars ($100.00) before October 1, 2012; 4 after September 30, 2012, disability retirement annuitants receiving an 5 annual annuity of more than Nineteen Thousand Five Hundred Dollars 6 ($19,500.00) but not more than Twenty-Five Thousand Dollars ($25,000.00) 7 shall receive an automatic annual increase of One Hundred Seventy-Five 8 Dollars ($175.00); and 9 (5) after September 30, 2012, disability retirement annuitants 10 receiving an annual annuity of more than Twenty-Five Thousand Dollars 11 ($25,000) shall receive an automatic annual increase of One Hundred 12 Twenty-Five Dollars ($125.00). 13 SECTION 6. The first sentence in 8137(b) Title 4 Guam Code Annotated, 14 Chapter 8, Article 1, is hereby amended to read as follows: 15 "(b) Government Unfunded, Liability Amortization Cost. An 16 amount resulting from the application of a rate percent of total salaries of all 17 members which will amortize the remaining liability for prior service over a 18 period of eighty-five (8~_(}) years following May 1, 1951." [remaining 19 sentences retained] 20 SECTION 7. Effective Date. Except as otherwise provided herein, this 21 Act shall take effect upon enactment. 22 SECTION 8. Severability. If any provision of this Act or its application to 23 any person or circumstance is found to be invalid or contrary to law, such 24 invalidity shall not affect other provisions or applications of this Act which can be 25 given effect without the invalid provisions or applications, and to this end the 26 provisions of this Act are severable. -24-