A city, village, or township which has a police or fireman's retirement system which is not included under Act No. 345 of the Public Acts of 1937, as amended, being sections 38.551 to 38.562 of the Michigan Compiled Laws, may provide for a military service credit, not to exceed 5 years, to a member of the retirement system employed subsequent to his service in the military.

     A member who elects to claim the service credit provided for in section 1 shall pay to the retirement system an amount, together with interest, equal to the annual contribution rate in effect at the time of his election multiplied by the period of military service claimed.