Montana Governor Marc Racicot on Wednesday signed legislation to create an optional 401(a) defined contribution plan for state and local government employees and remove the current plans $185 million unfunded liability. The plan will be in effect as of July 1, 2002, said Michael OConnor, executive director of the Montana Public Employee Retirement System. The defined contribution plan will not cover safety personnel such as fire and police employees or teachers. The 401(a) will be administered by the Montana Board of Investments, which also oversees seven other plans. The current $2.4 billion plan is a hybrid defined benefit/money purchase plan. Under the new law, current employees and new hires will be able to choose the plan in which they wish to invest, he said. The contribution rates will be the same: 6.9% from employers and employees. For the next 12.75 years, about 2.37% of the employers contribution will be used to pay off the unfunded liability, he explained. Another 0.1% of the employers contributions over the next two years will be deposited in a fund to educate employees about the change. The bill also transfers administration of the states 457 plan from the Department of Administration to the retirement board, he said. The 457 plan is available to state employees.