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There is established the defined contribution component of the hybrid plan that provides a defined contribution plan within the provisions of the profit sharing and/or salary reduction plan established under chapter 25, part 3 of this title and as supplemented pursuant to this part.
Any person who becomes a participant in the hybrid plan shall have an initial two percent (2%) of that participant's compensation automatically deferred into the defined contribution component of the plan during the initial year of participation, unless such participant files with that participant's employer a notice of that participant's election not to contribute. Any notice of non-election shall be made in such format and through such medium as prescribed by the retirement system and must be filed with that participant's employer by no later than thirty (30) calendar days from the date of the notice of automatic deferral letter.
All contributions made by or on behalf of a participant to the defined contribution component of the plan who does not file a notice of non-election within the prescribed period shall be directed to the default option established by the trustees of the profit sharing and/or salary reduction plan established under chapter 25, part 3 of this title until such time as the participant selects a different investment option or options. Notwithstanding any provision of this section or any other law to the contrary, future deferrals may be cancelled or adjusted at any time by a participant provided the participant notifies that participant's employer in such format and through such medium as may be prescribed by the retirement system at least one (1) month before the payday on which the cancellation or change is to be effective; provided, however, that any adjustment in the deferrals, other than a cancellation, cannot cause the amount of the deferrals to be less than twenty dollars ($20.00) per month, or if the employee is paid twice a month, ten dollars ($10.00) semimonthly, or such other lower amount as may be established under chapter 25, part 3 of this title. In addition, any adjustment in the deferrals cannot cause the amount of the deferrals to exceed the maximum allowed under the Internal Revenue Code (26 U.S.C.).
Any participant who affirmatively declines to make employee deferrals after the first automatic enrollment contribution was made, may make an election to withdraw that participant's entire automatic enrollment contribution. This election must be submitted no later than ninety (90) calendar days after the payroll date in which the first automatic enrollment contribution is made on behalf of the participant. The amount of the distribution shall be the value of the automatic enrollment contributions plus or minus investment gains or losses as of the date the distribution is processed. Automatic enrollment contributions made after such date shall remain in the defined contribution component of the plan and shall be subject to the plan's regular distribution rules. Further, a participant who has made an election to withdraw and who thereafter leaves employment and is then rehired by the same employer as defined below or, by the same political subdivision in the case of a political subdivision employee, before a twelve (12) continuous month absence shall not be permitted to make another election to withdraw that participant's automatic enrollment contribution. For purposes of this subdivision (b)(3), “same employer” means the employer for which the person last worked prior to separation from covered employment. All departments, agencies and instrumentalities in the executive, legislative and judicial branches of state government, including public institutions of higher education, shall be deemed one and the same employer. All public schools within the Tennessee public school system, except for public institutions of higher education, shall be deemed one and the same employer. Notwithstanding subsection (d) below, the employer matching contributions described in subsection (c) that are attributable to the distribution of the automatic enrollment contributions shall be forfeited and placed in a forfeiture account. Amounts in the forfeiture account shall be used in the manner provided in the plan document established for the profit sharing and/or salary reduction plan established under chapter 25, part 3 of this title. The employer matching contributions described in subsection (c) shall not be made if a permissible withdrawal is taken pursuant to this subsection (b) before the date the matching contribution is allocated.
The initial two percent (2%) automatic enrollment contribution described in this subsection (b) shall be subject to a percentage annual increase thereafter if provided for in the plan document established for the profit sharing and/or salary reduction plan established under chapter 25, part 3 of this title.
The automatic deferrals shall be contributed on a pre-tax basis and shall continue until the participant affirmatively elects otherwise.
Notwithstanding § 8-35-111, each employer shall make a mandatory contribution to the defined contribution component of the plan on behalf of each of its employees participating in the hybrid plan, regardless of whether the employees make any employee contributions pursuant to subsection (b). Employer contributions for kindergarten through twelfth (K-12) grade teachers shall be paid by the respective local education agency for which the teachers are employed. The amount of the contribution shall be five percent (5%) of the respective employee's salary. The mandatory contributions required in this subdivision (c)(1) shall be in addition to any match provided for in § 8-25-303 to participants who otherwise participate in the profit sharing and/or salary reduction plan under chapter 25, part 3 of this title; provided, that the total combined employer contributions to all defined contribution plans on behalf of a single employee shall not exceed seven percent (7%) of the employee's salary, and shall conform to all applicable laws, rules and regulations of the internal revenue service governing profit sharing and/or salary reduction plans for governmental employees. If the employer contributions to all such plans combined exceed such amount, the employer shall reduce its contributions to any other defined contribution plans such that the contributions to the defined contribution component of the plan and to the other plans do not exceed the limit.
Each participant who affirmatively elects to make employee deferrals shall select the investment option or options in which the contributions made by or on behalf of such participant are to be directed. Should a participant fail to select an investment option, the contributions attributable to the participant shall be directed to the default option established for the defined contribution component of the plan until such time as the person selects a different investment option or options.
The total amount contributed by the employee and employer under this section shall vest to the participant's benefit immediately.
The state treasurer may offer financial educational services for participants in the defined contribution component of the hybrid plan. The services may include, but are not limited to, offering financial planning guidance on matters such as investment diversification, investment risks, investment costs, asset allocation, and other topics regarding investing, generally.