15-121

15-121. School employees; participation in
federal retirement plans and deferred compensation plans;
prohibition against use of public monies; exceptions

A. Employees of school districts, accommodation school employees, employees of the
community college districts, employees of the universities and all other certificated and
noncertificated employees of the schools of this state, including those located at state
institutions, may participate in federal retirement or deferred compensation plans as
provided in 26 United States Code sections 401(a), 403(b) and 457(b), if the governing
body approves.

B. Upon election by an employee to participate through salary reduction
contributions if permitted under federal law or by election of the governing board to
make nonelective employer contributions, the governing board of a school district, the
county school superintendent, the community college district governing board, the Arizona
board of regents or other governing body or employer of the employee shall:

1. Invest such an amount as authorized by the employee, to be reduced from the
regular annual salary of the employee, in a 26 United States Code section 403(b) tax
sheltered annuity or custodial account or a 26 United States Code section 457(b) deferred
compensation plan.

2. Invest nonelective employer contributions in a 26 United States Code section
401(a) defined contribution plan or a 26 United States Code section 403(b) tax sheltered
annuity or custodial account.

C. The amount to be invested shall be determined by the employee not less than
fifteen days before the employee's first payday in the school year, or at any time during
the school year at the option of the governing body. The employing body or county school
superintendent shall assume no responsibility other than to make the requested payments
during the actual time of the employment of the employee. The employer shall transfer to
the fund manager the employee contributions within ten working days after each and every
payroll date. Contributions transferred after that date shall include a penalty of six
per cent a year for each day the contributions are late. The penalty shall be paid by the
employer. If the employee changes the employee's employment to another school or school
district, the employee may authorize the employee's new employer to continue the payments
if the governing body approves.

D. State, county, district or other public monies shall not be used in the purchase
of any annuity or payment of any deferred compensation authorized by this article, except
for monies authorized for the following purposes:

1. The recruitment and retention of selected employees, including teachers when
there are shortages of teachers.

2. As a benefit to encourage teachers specifically selected by the governing board
or the board's authorized designee to teach in an underperforming school.

3. For the reduction of the unfunded liabilities of unused leave pay accruals with
in-service nonelective employer contributions.

4. For the replacement of unused leave pay or other types of severance pay at the
time of severance of employment.

5. To buy out the individually negotiated contracts of key employees.

6. To provide incentives for the early retirement of selected employees as
determined by the governing board.

E. If monies are contributed pursuant to subsection D, paragraph 4, 5 or 6, at the
discretion of the governing board, those monies may be contributed pursuant to 26 United
States Code section 401(a) only in the final year of service, or pursuant to 26 United
States Code section 403(b) both in the final year of service and for up to five tax years
following the tax year of the final year of service.