006.09.1 R3-19-4-1602. Deferred Compensation Plans
AR ADC 006.09.1 R3-19-4-1602Arkansas Administrative Code
Ark. Admin. Code 006.09.1 R3-19-4-1602
006.09.1 R3-19-4-1602. Deferred Compensation Plans
Authority
Arkansas Annotated Code 21-5-504 states:
“(a) The State or any county, city, town, or other political subdivision may agree, by contract, with any employee to defer, in whole or in part, any portion of that employee's future compensation to a deferred compensation program.
(B) Through a trust or custodian (Plan Administrator), contract for, purchase, or otherwise procure fixed or variable life insurance contracts, mutual funds, pooled investment funds, or such other investment vehicles that comply with State and federal laws and which permit the deferral of compensation for income tax purposes.
Purpose
The purpose of the Arkansas Diamond Deferred Compensation Plan (“Plan”), formerly the State of Arkansas Deferred Compensation Plan, is to provide employees and independent contractors of the State of Arkansas and its political subdivisions with a convenient way to save on a regular long-term voluntary basis to provide supplemental income for their retirement. The Plan is intended to satisfy the requirements for an “eligible deferred compensation plan” under Section 457 of the Internal Revenue Code of 1986, as amended, established and maintained by and for the State of Arkansas, its political subdivisions and any agency or instrumentality of the State of Arkansas or its political subdivisions. All amounts of compensation deferred under the Plan and all income attributable thereto shall be held for the exclusive benefit of participants and their beneficiaries and alternate payees.
In order to make deferral contributions to the Plan, an employee or independent contractor must enter into a deferral agreement, which shall become effective as soon as administratively feasible after the deferral agreement is entered into by the employee or independent contractor.
The operation and administration of the Plan shall be the responsibility of the Executive Director, Employee Benefits Division, Department of Finance and Administration of the State of Arkansas, or the person or persons designated by the Executive Director to act on his or her behalf.
The Executive Director shall, in his or her sole and complete discretion, determine both the financial organizations, which provide investment funds to the Plan, and each individual investment fund offered as an investment option under the Plan. Investment funds may include annuity contracts, fixed or variable life insurance contracts, mutual funds, pooled investment funds or such other investment vehicles that comply with Arkansas and federal laws and which permit the deferral of compensation for income tax purposes when held in a custodial account for the Plan.
TERM DEFINITIONS
Employee - Any employee who is employed by an Employer and is characterized as a common law employee under Arkansas law.
Employer - The State and any Participating Employer.
Independent Contractor - An individual who performs services for an Employer as an independent contractor.
Participant - An individual who is or who has previously deferred compensation under the Plan pursuant to a deferral agreement, and who has not received a distribution of all of his or her accounts under the Plan.
Participating Employer - Any political subdivision of the State and any agency or instrumentality of the State or a political subdivision of the State, the governing body of which has adopted the Plan by appropriate resolution or other legal action with the consent of the Executive Director, and in any case where a resolution or other legal action of such governing body is required by law to be approved by any other body or officer, with the written approval of such other body or officer.
Plan Administrator - Citistreet (Third Party Administrator)
Plan Sponsor - Employee Benefits Division
Regulations
Regulations have been established as broad guidelines for State employees' eligibility to participate in the Arkansas Diamond Deferred Compensation Plan. The Employee Benefits Division (EBD) of the Department of Finance and Administration (DFA) has sponsorship oversight of this plan. As such, EBD may enter into a contract or contracts with Plan Administrators to conduct the daily work of The Plan and also hire a consultant as an advisor in these matters.
EBD shall require that the Plan Administrator obtain official permission from each employee participating in the “Plan” to authorize salary reduction and contributions into the “Plan” and that the Plan Administrator be responsible for compliance with the Plan Document (on file at EBD) and State and Federal regulations.
Regarding the Employee's Opportunities to Participate in Plans:
All State employees (including physicians who receive State Medicaid funds) are to have equal opportunity to participate in any deferred compensation plan and any options or benefits related to such plan as has been approved. Any employee hired after the “Plan” is effective is to be informed of the “Plan” at the onset of their employment.
EBD is responsible for seeing that a proper, unbiased, educational program is made available to eligible employees to inform them of the pertinent information relating to the “Plan” or plans in which they may participate. This educational program may take the form of an instructional seminar for all eligible employees, a direct mailing to all eligible employees or both. The seminar approach is recommended where practicable because it affords the employee the opportunity to ask questions and have direct contact with persons knowledgeable on the subject.
Regarding Control of Funds:
EBD acts as the Plan Sponsor to the Third Party vendor (Plan Administrator) that manages the funds allocable to any deferred compensation plan or plans in which State employees participate.
When a salary reduction agreement exists, the employee's Federal and State Income Tax withholding will be computed on the net salary after the amount of the salary reduction is applied. The salary reduction will be deducted each payroll from the employee's pay and paid to the third party vendor by the DFA-Office of Personnel Management-Payroll Systems.
Records of such deductions are maintained on AASIS in the employee's payroll result table. AASIS also maintains a record of the third party payment to the vendor.
Payment of contributions for investment in the “Plan” investment options on behalf of participating employees will be made promptly, preferably by secure electronic fund transfer (EFT).
Complete records of salary payments, salary reduction amounts and investment elections will be maintained. Federal and State taxable wages are reported annually in boxes one (1) and sixteen (16) of Internal Revenue Service W-2 forms. The amount of salary reduction for a deferred compensation “Plan” is reported in box twelve (12).
The Plan Administrator is responsible for making prompt payment of any benefits to which the employee or former employee is entitled under the terms of the contract. The Plan Administrator shall maintain complete and accurate records of such payments.
Any benefits forfeited by any State, county, city, town or other political subdivision employee under a deferred compensation agreement shall become the property of the unit of government for which the employee worked and shall be considered general revenues. (The likelihood of this is small, as the “Plan” requires participants to name a beneficiary to receive the account balance in the event of the participant's death. If no beneficiary is on file, plan assets will become part of the deceased's estate.)
Current with amendments received through February 15, 2024. Some sections may be more current, see credit for details.
Ark. Admin. Code 006.09.1 R3-19-4-1602, AR ADC 006.09.1 R3-19-4-1602
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