Stricken language would be deleted from and underlined language would be added to present law.
Act 64 of the Regular Session
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State of Arkansas 1
94th General Assembly A Bill 2
Regular Session, 2023 HOUSE BILL 1183 3
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By: Representative Maddox 5
By: Senator K. Hammer 6
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For An Act To Be Entitled 8
AN ACT TO AMEND AND UPDATE PROVISIONS FO R OUTSOURCING 9
UNDER THE ARKANSAS T EACHER RETIREMENT SY STEM; TO 10
DECLARE AN EMERGENCY ; AND FOR OTHER PURP OSES. 11
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Subtitle 14
TO AMEND AND UPDATE PROVISIONS FOR 15
OUTSOURCING UNDER THE ARKANSAS TEACHER 16
RETIREMENT SYSTEM; AND TO DECLARE AN 17
EMERGENCY. 18
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BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 21
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SECTION 1. Arkansas Code § 24 -7-506 is amended to read as follows: 23
24-7-506. Outsourcing — Election to participate — Definitions. 24
(a) As used in this section: 25
(1)(A) “Covered employer” means any public school, public 26
educational agency, or other eligible employer participating in the Arkansas 27
Teacher Retirement System. 28
(B) “Covered employer” does not include a: 29
(i) Nonmandatory employer or a PSHE employer as 30
defined under § 24-7-1602; or 31
(ii) Covered employer that reports through the 32
Arkansas Administrative Statewide Information System; 33
(2)(A) “Embedded employee” means a person who: 34
(i) Provides an outsourced service on the premises 35
of a covered employer; and 36 HB1183
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(ii) Is employed and paid by an outsource 1
contractor. 2
(B) “Embedded employee” does not include a person who is 3
employed by: 4
(i) A covered employer listed under § 24-7-202; or 5
(ii) An employer that offers the Arkansas Teacher 6
Retirement System as an optional retirement plan as of the date of 7
outsourcing; 8
(3) “Outsource” or “outsourcing” means the use of a contractor 9
by a covered employer for the performance of a service common to the normal 10
daily operation on the premises of the covered employer; 11
(4) “Outsource contractor” means a person who is contractually 12
obligated under an outsourcing agreement to provide a covered employer with a 13
service common to the normal daily operation of the covered employer; 14
(5) “Participating employer” means a covered employer that 15
outsources and opts for the embedded employees of all of its the covered 16
employer's outsource contractors to become members of the Arkansas Teacher 17
Retirement System; 18
(6)(A) “School nursing” means a nursing service that is required 19
to be offered in a public school under § 6-18-706 or the Standards for 20
Accreditation of Arkansas Public Schools and School Districts. 21
(B) “School nursing” does not include nursing services 22
provided by a: 23
(i) School-based health clinic under § 6-18-703; 24
(ii) Medical clinic operated on a public school 25
campus by a hospital or physician's office that is under contract with the 26
public school; 27
(iii) Healthcare provider other than a nurse; or 28
(iv) Healthcare service reimbursed or paid for by 29
Medicaid, Medicare, health insurance, or any other third-party payer; 30
(7) “Service common to the normal daily operation” means and is 31
limited to a service that: 32
(A) Is provided by an outsource contractor or embedded 33
employee to a covered employer; 34
(B) Is physically provided or based on the premises of a 35
covered employer; 36 HB1183
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(C) Is paid for with public funds and not with private 1
grant funds; and 2
(D) Consists of one (1) or more of the following: 3
(i) The maintenance and operation of: 4
(a) One (1) or more vehicles used for the 5
regular and daily transport of passengers; and 6
(b) A facility that provides support for the 7
maintenance and operation of one (1) or more vehicles described under 8
subdivision (a)(7)(D)(i)(a) of this section; 9
(ii) The maintenance and operation of a cafeteria or 10
other food service operation; 11
(iii) Custodial or maintenance services for the 12
regular and continuous maintenance, repair, and upkeep of grounds or 13
facilities; 14
(iv) Security services that are not covered by 15
another retirement system; 16
(v) School nursing; 17
(vi) Substitute teaching; or 18
(vii) Service as a teacher's aide; and 19
(8) “Surcharge employer” means a covered employer that 20
outsources and pays a surcharge to the Arkansas Teacher Retirement System in 21
lieu of opting for the embedded employees of outsource contractors to accrue 22
service credit in the Arkansas Teacher Retirement System. 23
(b) A covered employer that enters into an agreement to outsource a 24
service common to the normal daily operation shall make an irrevocable 25
election to be either a participating employer or become a surcharge employer 26
within sixty (60) days of the outsourcing agreement on a form provided by or 27
in a manner established by the Arkansas Teacher Retirement System. 28
(c)(1) If a covered employer elects to become a surcharge employer 29
under this section, then the covered employer A surcharge employer shall 30
account for and remit to the Arkansas Teacher Retirement System a monthly 31
surcharge of no more than four percent (4%) on the total salaries paid to all 32
the embedded employees on an aggregate basis as follows:. 33
(A) Five-tenths of one percent (0.5%) during the 2018 34
fiscal year; 35
(B) One percent (1%) during the 2019 fiscal year; 36 HB1183
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(C) Two percent (2%) during the 2020 fiscal year; 1
(D) Three percent (3%) during the 2021 fiscal year; and 2
(E) An amount not to exceed four percent (4%) during the 3
2022 fiscal year and succeeding fiscal years as established by a resolution 4
of the Board of Trustees of the Arkansas Teacher Retirement System at a 5
meeting of the board. 6
(2) If the covered employer is outsourcing on August 1, 2017, 7
the surcharge shall be payable beginning in the 2018 fiscal year. The Board 8
of Trustees of the Arkansas Teacher Retirement System may establish by 9
resolution the surcharge rate for any fiscal year following the 2022 fiscal 10
year. 11
(3) A surcharge adopted by the board applies to an entire fiscal 12
year and shall be adopted prior to before the beginning of the fiscal year. 13
(d) If a covered employer elects to become a participating employer as 14
provided under this section, then the covered employer shall account for and 15
remit each of the covered employer's contributions in the same amount and in 16
the same manner as required for covered employer contributions under § 24-7-17
401 and member contributions under § 24-7-406. 18
(e)(1)(A) A covered employer that begins outsourcing after August 1, 19
2017, and elects to become a participating employer may phase-in the election 20
by selecting an effective date that is no later than the beginning of the 21
third fiscal year after the effective date of the outsourcing agreement. 22
(B) During the phase-in of becoming a participating 23
employer, the covered employer shall account for and remit a phase-in 24
surcharge in the same amount and manner required of a surcharge employer 25
under subsection (c) of this section. 26
(2)(A) If a covered employer is outsourcing on August 1, 2017, 27
and the covered employer elects to become a participating employer, then the 28
covered employer may phase-in the election by selecting an effective date 29
that is no later than the beginning of the fourth fiscal year after August 1, 30
2017. 31
(B) During the phase-in of becoming a participating 32
employer, the covered employer shall account for and remit a phase-in 33
surcharge in the same amount and manner as required of a surcharge employer 34
under subsection (c) of this section. 35
(f)(1)(d)(1) The Arkansas Teacher Retirement System may require a 36 HB1183
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covered employer that makes an election under this section surcharge employer 1
to provide any documentation necessary to collect and account for the 2
surcharge or contributions as is consistent with the covered employer's 3
election. 4
(2) The Arkansas Teacher Retirement System may shall collect an 5
unremitted surcharge amount due, including interest, from a surcharge 6
employer under § 24-7-401 or contribution due from a participating employer 7
under § 24-7-406 in any manner allowed by law. 8
(3) If a covered employer surcharge employer reasonably accepts 9
a written statement from an outsource contractor reporting the salaries paid 10
by the outsource contractor to embedded employees for services common to the 11
normal daily operation of the covered employer surcharge employer, it shall 12
be conclusively presumed that the written statement accurately reflects the 13
salaries subject to surcharge under this section. 14
(g)(1) A covered employer or an outsource contractor may request a 15
determination from the Arkansas Teacher Retirement System as to whether an 16
embedded employee performs or will perform a service common to the normal 17
daily operation of a covered employer. 18
(2) A request made under subdivision (g)(1) of this section 19
shall include: 20
(A) Information about the employment relationship and 21
contract provisions that are necessary for the Arkansas Teacher Retirement 22
System to evaluate the service provided to the covered employer; and 23
(B) Any additional information requested by the Arkansas 24
Teacher Retirement System to make the determination. 25
(3) The board may promulgate rules necessary to administer this 26
section. 27
(h)(1)(e)(1) The Division of Youth Services Education System shall be 28
a participating employer and may designate any or all of its embedded 29
employees as eligible for membership in the Arkansas Teacher Retirement 30
System. 31
(2) An embedded employee of a contractor for the Division of 32
Youth Services Education System who becomes a member of the Arkansas Teacher 33
Retirement System shall remain a member of the Arkansas Teacher Retirement 34
System as long as the member remains an embedded employee of a contractor for 35
the Division of Youth Services Education System. 36 HB1183
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(i)(f) The use of the terms “employee” and “employer” in this section 1
does not: 2
(1) Create or modify an employment relationship between an 3
embedded employee and a covered employer; 4
(2) Create, permit, expand, or modify any liability or 5
obligation by a covered employer to an embedded employee; or 6
(3) Create, permit, expand, or modify any cause of action by an 7
embedded employee against a covered employer under any employment, labor, 8
civil rights, or other law. 9
(g) The board may promulgate rules to implement this section. 10
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SECTION 2. EMERGENCY CLAUSE. It is found and determined by the 12
General Assembly of the State of Arkansas that the operations of a state 13
public retirement system are complex; that the Arkansas Teacher Retirement 14
System must be able to meet the needs of its members as anticipated by the 15
General Assembly; that certain provisions of the Arkansas Teacher Retirement 16
System Act, need revision and updating to address reporting, contribution, 17
and other administrative complexities caused by these provisions and to bring 18
these provisions into conformance with sound public pension policy and 19
actuarial requirements; that the revisions and updates are of great 20
importance to members and covered employers of the Arkansas Teacher 21
Retirement System and to other citizens of the State of Arkansas; that as the 22
Arkansas Teacher Retirement System operates on a fiscal year of July 1 to 23
June 30, a July 1, 2023, effective date is necessary in order to allow the 24
provisions within this act to begin on the first day of the fiscal year and 25
to allow for a structured and proper administration of the procedures 26
referenced in this act; that the updates and revisions to the Arkansas 27
Teacher Retirement System Act are of great importance and necessary for 28
protecting member benefits and clarifying the repor ting and contribution 29
requirements of employers participating in the Arkansas Teacher Retirement 30
System; and that this act is necessary in order to maintain an orderly system 31
of benefits for the members of the Arkansas Teacher Retirement System. 32
Therefore, an emergency is declared to exist, and this act being necessary 33
for the preservation of the public peace, health, and safety shall become 34
effective on July 1, 2023. 35
APPROVED: 2/13/23 36 HB1183
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