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art.004/1

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2013 -- H5127

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ARTICLE 4

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RELATING TO FICA ALTERNATE RETIREMENT PLAN

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     SECTION 1. Section 36-7-2 of the General Laws in Chapter 36-7 entitled "Federal Old-

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Age and Survivors' Insurance" is hereby amended to read as follows:

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     36-7-2. Definitions. -- For the purposes of sections 36-7-1 – 36-7-31, 36-7-33.1, and 36-

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7-35, the following terms shall have the meanings indicated unless different meanings are clearly

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expressed or required by the context:

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     (1) "Agency of the state" shall mean:

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     (i) All departments, divisions, agencies, and instrumentalities of the state which are not

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juristic entities, legally separate and distinct from the state;

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     (ii) Civilian employees of the Rhode Island national guard; or

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     (iii) Any instrumentality of the state such as fire districts, water districts, water

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authorities, sewer commissions and authorities, housing authorities, or other instrumentality of

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the state which are a juristic entity and legally separate and distinct from the state and if the

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employees of the instrumentality are not by virtue of their relation to juristic entity employees of

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the state. Without limiting the generality of the foregoing, examples of those agencies would be

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the Kent County water authority, the Providence housing authority, the Blackstone Valley sewer

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district commission, and other like instrumentalities of the state.

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     (2) "City or town" shall mean:

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     (i) Any city or town of the state of Rhode Island, inclusive of any department, division,

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agency, board, commission, or bureau thereof;

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     (ii) Any instrumentality of a city or town which is a juristic entity and legally separate

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and distinct from the city or town and if its employees are not by virtue of their relation to the

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juristic entity employees of the city or town; or

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     (iii) Any instrumentality of two or more citizens and/or towns which is a juristic entity as

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provided in subdivision (ii) hereof.

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     (3) "IRC" shall mean the Internal Revenue Code of 1986, as amended.

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     (3)(4) "Coverage group" shall mean:

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     (i) All employees of the state other than those engaged in performing service in

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connection with a proprietary function;

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     (ii) All employees of a city or town other than those engaged in performing service in

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connection with a single proprietary function;

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     (iii) All employees of the state engaged in performing service in connection with a single

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proprietary function;

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     (iv) All employees of an agency of the state;

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     (v) All employees of a city or town of the state engaged in performing service in

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connection with a single proprietary function. If under the preceding sentence an employee would

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be included in more than one coverage group by reason of the fact that he or she performs service

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in connection with two (2) or more proprietary functions or in connection with both a proprietary

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function and a nonproprietary function, he or she shall be included in only one coverage group.

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The determination of the coverage group in which the employee shall be included shall be made

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in such manner as may be specified in the agreement. Members of retirement systems shall

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constitute separate coverage groups as provided in section 36-7-10.

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     (4)(5) "Employee" shall mean any officer or employee of any city, town, or agency of the

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state receiving salaries or wages for employment.

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     (5)(6) "Employment" shall mean any service performed by an employee for wages as a

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member of a coverage group as herein defined, including service of an emergency nature, service

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in any class or classes of elective positions and service in part-time positions, but excluding the

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following:

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     (i) Service in a position the compensation for which is on a fee basis;

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     (ii) Service performed by election officials or election workers for calendar year 2003 in

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which the remuneration paid for that service is less than one thousand two hundred fifty dollars

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($1,250), and for each calendar year after 2003 in which the remuneration paid is less than the

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adjusted amount in accordance with section 218(c)(8)(B) of the Social Security Act;

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     (iii) Service which under the federal Social Security Act may not be included in an

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agreement between the state and the secretary entered into under this chapter;

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     (iv) Service which, in the absence of an agreement entered into under sections 36-7-1 –

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36-7-31, would constitute "employment" as defined in the federal Social Security Act. Service

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which under the federal Social Security Act may be included in an agreement only upon

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certification by the governor in accordance with section 218(d)(3) of the federal Social Security

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Act, 42 U.S.C. section 418(d)(3), shall be included in the term "employment" if and when the

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governor issues, with respect to that service, a certificate to the secretary, pursuant to section 36-

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7-19.

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     (B) Notwithstanding any of the foregoing, if pursuant to section 141 of P.L. 92-603, 42

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U.S.C. section 418, the state agreement with the federal government referred to in section 36-7-3

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is modified appropriately at any time prior to January 1, 1974, the term "employment" with

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respect to any coverage group specified in the modification shall, effective after the effective date

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specified in the modification, include services in designated part-time positions but not services

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performed in the employ of a school, college, or university by a student who is enrolled and

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regularly attending classes at that school, college, or university.

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     (7) "FARP" shall mean the FICA Alternative Retirement Income Security Program as

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described in section 36-7-33.1.

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     (8) "FARP-eligible employee" shall mean any part-time, seasonal, or temporary

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employee who is ineligible for participation in the Employees' Retirement System of Rhode

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Island.

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     (9) "FARP part-time employee" shall mean an employee of the state of Rhode Island who

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works twenty (20) hours or less per week, in accordance with IRC standards.

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     (6)(10) "Federal Insurance Contributions Act" or "FICA" shall mean subchapter A of

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chapter 9 of the federal Internal Revenue Code of 1939, subchapters A and B of chapter 21 of the

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federal Internal Revenue Code of 1954, and subchapters A and B of chapter 21 of the federal

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Internal Revenue Code of 1986 as those codes have been and may from time to time be amended;

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and the term "employee tax" shall mean the tax imposed by section 1400 of the code of 1939,

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section 3101 of the code of 1954, and section 3101 of the code of 1986.

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     (7)(11) "Federal Social Security Act", 42 U.S.C. section 301 et seq., shall mean the act of

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congress approved August 14, 1935, officially cited as the "Social Security Act", including any

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amendments thereto, and any regulations, directives, or requirements interpretative or

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implementive thereof.

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     (8)(12) "Part-time employment" shall mean any employment by those who work on a

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regularly scheduled basis regardless of hours.

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     (9)(13) "Retirement board" shall mean the retirement board as provided in chapter 8 of

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this title.

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     (10)(14) "Secretary", except when used in the title "secretary of the treasury", shall mean

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the secretary of health and human services and any individual to whom the secretary of health and

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human services has delegated any of his or her functions under the federal Social Security Act, 42

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U.S.C. section 301 et seq., with respect to coverage under that act of employees of states and their

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political subdivisions.

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     (11)(15) "Sick pay" shall mean the amount of any payment (including any amount paid

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by an employer for insurance or annuities, or into a fund to provide for any sick pay) made to, or

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on behalf of, an employee or any of his or her dependents under a plan or system established by

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an employer which makes provision for his employees generally (or for his or her employees

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generally and their dependents) or for a class or classes of his employees (or for a class or classes

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of his employees and their dependents), on account of sickness or accident disability.

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     (12)(16) "State" shall mean the state of Rhode Island.

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     (13)(17) "Wages" or "salaries" shall mean all compensation received by an employee for

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employment as defined herein, including the cash value of all remuneration received by an

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employee in any medium other than cash, except that this term shall not include that part of the

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remuneration which, even if it were for "employment" within the meaning of the Federal

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Insurance Contributions Act, 26 U.S.C. section 3101 et seq., would not constitute "wages" within

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the meaning of that act.

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     SECTION 2. Chapter 36-7 of the General Laws entitled "Federal Old-Age and Survivors'

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Insurance" is hereby amended by adding thereto the following section:

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     36-7-33.1. FICA Alternative Retirement Income Security Program. -- (a) For FARP

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eligible employees, the state shall establish the FICA Alternative Retirement Income Security

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Program. The FARP shall be administered in accordance with the following provisions:

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     (1) IRC compliance. The FARP shall be administered as a defined contribution plan

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under section 401(a) of the IRC, and shall provide retirement benefits as required under section

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3121(b)(7)(F) of the IRC.

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     (2) Employee participation in the FARP - One-Time Opt-Out Exception. With the one

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exception described in (b) below, FARP-eligible employee participation in the FARP shall be

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mandatory. Each participant shall make mandatory payroll deduction contributions to the FARP

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equal to a minimum of seven and five tenths percent (7.5%) of the employee's gross wages for

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each pay period. Any payroll deduction contributions made pursuant to the FARP shall not be

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included in the computation of federal income taxes withheld on behalf of any participant. Once

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implemented, the participants, and the state on behalf of the participants, shall not continue to

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make FICA contributions. The FARP shall be administered by the financial institution currently

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administering the 401(a) plan for the state employee retirement plan, as described in Title 36

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Chapter 10.3.

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     (b) An otherwise FARP-eligible employee, who is employed by the state at the time this

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section takes effect, may opt to not participate in the FARP. An employee who opts to not

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participate in the FARP will continue to make FICA contributions and the state shall continue to

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make FICA contributions on behalf of the employee. An employee who opts to not participate in

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the FARP may subsequently, without penalty, choose to participate in the FARP; provided,

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however, such employee must continue to participate in the FARP for as long as he or she is a

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FARP-eligible employee.

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     (c) Review by state investment commission. The state investment commission shall, from

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time to time, review and evaluate the reasonableness of the selected financial institution's fees and

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the performance of the selected financial institution's funds.

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     SECTION 3. This article shall take effect as of July 1, 2013.