Amends existing law to revise provisions regarding qualified pre-tax contributions and investment earnings and certain qualified Roth contributions and investment earnings.

LEGISLATURE OF THE STATE OF IDAHO Sixty-eighth Legislature Second Regular Session - 2026 IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 543 BY COMMERCE AND HUMAN RESOURCES COMMITTEE AN ACT1 RELATING TO THE PUBLIC EMPLOYEE RETIREMENT SYSTEM; AMENDING SECTION2 59-1308, IDAHO CODE, TO REVISE PROVISIONS REGARDING QUALIFIED PRE-TAX3 CONTRIBUTIONS AND INVESTMENT EARNINGS AND CERTAIN QUALIFIED ROTH CON-4 TRIBUTIONS AND INVESTMENT EARNINGS; AND DECLARING AN EMERGENCY AND5 PROVIDING AN EFFECTIVE DATE.6

Be It Enacted by the Legislature of the State of Idaho:7

SECTION 1. That Section 59-1308, Idaho Code, be, and the same is hereby8 amended to read as follows:9 59-1308. SUPPLEMENTAL BENEFIT PLAN -- CONTRIBUTIONS AND EXPENSES10 OF THE SUPPLEMENTAL BENEFIT PLAN -- INDEMNIFICATION. (1) The state shall11 sponsor and the board shall administer one (1) or more supplemental benefit12 plans to be used for allocation of extraordinary gains as provided in section13 59-1309, Idaho Code, and for voluntary contributions of active members.14 The supplemental plans may be established under the qualified requirements15 of section 401(a) of the Internal Revenue Code and with the qualified cash16 or deferred arrangements under section 401(k) of the Internal Revenue Code17 or any other tax-deferred plan permitted by law, as determined by the re-18 tirement board. The board is authorized to secure such qualified staff and19 consultants as it determines necessary to establish and administer such20 plans. Employee and employer contributions shall be permitted according to21 the provisions of these plans as established by the board. For purposes of22 this section, "employee" shall mean a participant as defined in the supple-23 mental benefit plan documents or board rules.24 (2) The board is authorized, but not required, to establish separate25 trust funds to hold the assets of the supplemental benefit plans created un-26 der this section. The investment options available under supplemental bene-27 fit plans shall be determined by the board and may include but are not limited28 to investment in all or part of the public employee retirement fund and use of29 private vendor options.30 (3) Supplemental benefit plans shall be available to all active members31 and shall be in addition to any other retirement or tax-deferred compensa-32 tion system established by the employer. The board may provide educational33 opportunities related to supplemental benefit plans and retirement savings,34 as determined by the board.35 (4) Accounts shall be established in supplemental benefit plans for all36 active members eligible for an extraordinary gains transfer under section37 59-1309, Idaho Code. After the initial transfer of extraordinary gains,38 any active member may make additional voluntary contributions to his/her39 account, subject to applicable limitations, by authorizing his/her employer40 to contribute an amount by payroll deduction to the supplemental benefit41 plan in lieu of receiving such amount as salary. The amount of such contribu-42

2 tions shall be subject to any limitations established by the board or state1 or federal law. The employer shall provide coordination of contributions2 between multiple plans to assure that contribution limits are not exceeded.3 Should aggregate contributions to multiple plans exceed applicable lim-4 its, excess contributions shall be deemed to apply exclusively to plans not5 created by this chapter. In the event a preexisting plan is used as a sup-6 plemental plan, voluntary contributions may continue to be made to that plan7 despite the absence of extraordinary gains transfers.8 (5) For purposes of this section, the employer is authorized to make9 such deductions from salary for any employee who has authorized such deduc-10 tions in writing. The employer shall forward all contributions under this11 section to the board by the fifth working day after each payroll, in addi-12 tion to reports as directed by the board. Any costs incurred by the board,13 whether direct or indirect, due to an employer's failure to properly with-14 hold, transfer, limit and report contributions, shall be the responsibil-15 ity of the employer and shall be immediately due and payable upon notice from16 the board. This includes but is not limited to costs associated with plan17 corrections. Such costs shall be treated as delinquent contributions under18 section 59-1325, Idaho Code.19 (6) The board may enter into agreements with employers or require par-20 ticipation to implement the supplemental benefit plans, and the board may21 designate administrative agents to execute all necessary agreements per-22 taining to the supplemental benefit plans.23 (7) All contributions received from participants in the supplemental24 benefit plans shall be deposited with a trustee designated by the board. All25 such funds are hereby perpetually appropriated to the board, shall not be in-26 cluded in the department's budget, and may be invested or used to pay for in-27 vestment and administrative expenses of the supplemental benefit plans. In-28 active members may be required to transfer supplemental benefit plan account29 balances as determined by the board.30 (8) The board may establish rules to implement and administer supple-31 mental benefit plans. Costs of administration shall be appropriated by the32 legislature and may be paid from the interest earnings of the funds accrued33 as a result of the deposits or as an assessment against each account, to be34 decided by the board. Investment-related expenses are exempt from appropri-35 ation.36 (9)(a) Qualified pre-tax contributions and investment earnings under37 the supplemental benefit plans shall be in compliance with the require-38 ments of sections 401(a) and 401(k) of the Internal Revenue Code, as now39 in effect and as hereafter amended, or any other tax-deferred plan per-40 mitted by law.41 (b) Qualified after-tax contributions Roth contributions and invest-42 ment earnings shall be in compliance with the requirements of section43 401(k) sections 401(a), 401(k), and 402A of the Internal Revenue Code as44 now in effect and as hereafter amended.45 (c) Distributions of funds held in supplemental benefit plan accounts46 are subject to federal law limitations. The board may provide for re-47 tirement disbursement options other than lump sum payments.48 (10) All additional contributions made by the employee under this sec-49 tion shall continue to be included as regular compensation for the purpose50

3 of computing the employer and employee retirement contributions and pension1 benefits earned by an employee under this chapter, but such sum shall not be2 included in the computation of any income taxes withheld on behalf of any em-3 ployee. However, funds accrued in a supplemental benefit plan account shall4 not be considered in determining any other benefits under this chapter.5 (11) The provisions of sections 59-1316 and 59-1317(1), (2) and (5),6 Idaho Code, shall also apply to the supplemental benefit plans created under7 this section. Should a court order that an assignment be made to a partici-8 pant's spouse or former spouse of all or part of an account created under this9 section, the assignment shall be separate and distinct from any approved10 domestic retirement order required by section 59-1317(4), Idaho Code. Re-11 quirements for assignments of supplemental accounts may be set forth in rule12 or other plan documents.13 (12) Members of the retirement board or retirement system staff shall,14 jointly or individually, be provided a defense and indemnified against all15 claims, demands, judgments, costs, charges and expenses, including court16 costs and attorney's fees, and against all liability losses and damages of17 any nature whatsoever arising out of and in the course and scope of their18 official duties and functions in administering any plans created pursuant19 to the provisions of this section to the same extent as provided in section20 59-1305(1), Idaho Code. The venue of all actions in which the retirement21 board or retirement staff is a party shall be in Ada county, Idaho.22

SECTION 2. An emergency existing therefor, which emergency is hereby23 declared to exist, this act shall be in full force and effect on and after24 July 1, 2026.25