HOUSE BILL No. 5732 February 21, 2002, Introduced by Reps. DeWeese, Hummel, Julian, Stewart, Vear, Woronchak, Drolet, Middaugh, Kooiman, Hager, Birkholz, Van Woerkom, Shackleton, Voorhees, Neumann and Tabor and referred to the Committee on Senior Health, Security and Retirement. A bill to amend 1943 PA 240, entitled "State employees' retirement act," by amending sections 1b, 1d, 5, 11, 13, 19, 20, 20d, 21, 24, 33, 38, 46, 48, 49, and 52 (MCL 38.1b, 38.1d, 38.5, 38.11, 38.13, 38.19, 38.20, 38.20d, 38.21, 38.24, 38.33, 38.38, 38.46, 38.48, 38.49, and 38.52), section 1b as amended by 1996 PA 33, sections 1d and 49 as added by 1995 PA 176, sections 11 and 13 as amended and section 52 as added by 1996 PA 487, section 19 as amended by 1998 PA 205, section 20 as amended by 1996 PA 521, section 20d as amended by 1996 PA 532, section 38 as amended by 1996 PA 279, and section 48 as added by 1990 PA 110, and by adding section 19g. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 05975'01 MRM 2 1 Sec. 1b. (1) "Beneficiary" or "disability beneficiary" 2 means a person other than a retirant who receives a retirement 3 allowance, pension, or other benefit provided by this act. 4 (2) "Compensation" means the remuneration paid a member on 5 account of the member's services rendered to this state.to the6extent that the remuneration does not exceed the compensation7limit established in section 401(a)(17) of the internal revenue8code.If a member's remuneration is not paid totally in money, 9 the retirement board shall employ the maintenance-compensation 10 schedules established from time to time by the civil service 11 commission. Compensation does not include any of the following: 12 (a) Remuneration paid in lieu of accumulated sick leave. 13 (b) Remuneration for services rendered after October 1, 14 1981, payable at retirement or termination under voluntary or 15 involuntary pay reduction plan B, in excess of the amount the 16 member would have received had the member been compensated for 17 those services at the rate of pay in effect at the time those 18 services were performed. 19 (c) Payment for accrued annual leave at separation in excess 20 of 240 hours. 21 (d) Remuneration received by an employee of the DEPARTMENT 22 FORMERLY KNOWN AS THE department of mental health resulting from 23 severance pay received because of the deinstitutionalization of 24 the DEPARTMENT FORMERLY KNOWN AS THE department of mental health 25 resident population. 26 (e) Remuneration received as a bonus by investment managers 27 of the department of treasury under the treasury incentive bonus 05975'01 3 1 plan first approved by the civil service commission on 2 February 11, 1988, pursuant to section 5 of article XI of the 3 state constitution of 1963. 4 (f) Remuneration received as a bonus or merit payment by 5 assistant attorneys general in the department of attorney general 6 under the merit pay plan approved by the civil service commission 7 on January 19, 1990, pursuant to section 5 of article XI of the 8 state constitution of 1963. 9 (3) "Conservation officer" means an employee of the depart- 10 ment of natural resources, or its predecessor or successor 11 agency, who has sworn to the prescribed oath of office and who is 12 designated as a peace officer under section 1606 of part 16 13(enforcement of laws for protection of wild birds, wild animals,14and fish)of the natural resources and environmental protection 15 act,Act No. 451 of the Public Acts of 1994, being16section 324.16061994 PA 451, MCL 324.1606, and section 1 of 17Act No. 109 of the Public Acts of 1986, being section 300.21 of18the Michigan Compiled Laws1986 PA 109, MCL 300.21. 19 (4) "Credited service" means the sum of the prior service 20 and membership service credited to a member's service account. 21 Sec. 1d. (1)ExceptBEGINNING JANUARY 1, 2002, EXCEPT as 22 otherwise provided in this subsection, "eligible retirement plan" 23 means an individual retirement account described in section 24 408(a) of the internal revenue code, an individual retirement 25 annuity described in section 408(b) of the internal revenue code, 26 an annuity plan described in section 403(a) of the internal 27 revenue code,ora qualified trust described in section 401(a) 05975'01 4 1 of the internal revenue code, AN ANNUITY CONTRACT DESCRIBED IN 2 SECTION 403(B) OF THE INTERNAL REVENUE CODE, OR AN ELIGIBLE PLAN 3 UNDER SECTION 457(B) OF THE INTERNAL REVENUE CODE THAT IS MAIN- 4 TAINED BY A STATE, A POLITICAL SUBDIVISION OF A STATE, AN AGENCY 5 OR INSTRUMENTALITY OF A STATE, OR AN AGENCY OR INSTRUMENTALITY OF 6 A POLITICAL SUBDIVISION OF A STATE, SO LONG AS AMOUNTS TRANS- 7 FERRED INTO ELIGIBLE RETIREMENT PLANS FROM THIS RETIREMENT SYSTEM 8 ARE SEPARATELY ACCOUNTED FOR BY THE PLAN PROVIDER that accepts 9 the distributee's eligible rollover distribution. However, in 10 the case of an eligible rollover distribution to a surviving 11 spouse ON OR BEFORE DECEMBER 31, 2001, an eligible retirement 12 plan means an individual retirement account or an individual 13 retirement annuity described above. 14 (2)"EligibleBEGINNING JANUARY 1, 2002, "ELIGIBLE roll- 15 over distribution" means a distribution of all or any portion of 16 the balance to the credit of the distributee. Eligible rollover 17 distribution does not include any of the following: 18 (a) A distribution made for the life or life expectancy of 19 the distributee or the joint lives or joint life expectancies of 20 the distributee and the distributee's designated beneficiary. 21 (b) A distribution for a specified period of 10 years or 22 more. 23 (c) A distribution to the extent that the distribution is 24 required under section 401(a)(9) of the internal revenue code. 25 (d)TheEXCEPT AS OTHERWISE PROVIDED IN THIS SUBDIVISION, 26 THE portion of any distribution that is not includable in federal 27 gross income, determined without regard to the exclusion for net 05975'01 5 1 unrealized appreciation with respect to employer securities. IF 2 A PORTION OF A DISTRIBUTION THAT IS NOT INCLUDED IN FEDERAL GROSS 3 INCOME IS PAID TO AN INDIVIDUAL RETIREMENT ACCOUNT OR ANNUITY 4 DESCRIBED IN SECTION 408(A) OR 408(B) OF THE INTERNAL REVENUE 5 CODE OR A QUALIFIED DEFINED CONTRIBUTION PLAN DESCRIBED IN 6 SECTION 401(A) OR 403(A) OF THE INTERNAL REVENUE CODE, AND THE 7 PLAN PROVIDERS AGREE TO SEPARATELY ACCOUNT FOR AMOUNTS PAID, 8 INCLUDING ANY PORTION OF THE DISTRIBUTION THAT IS INCLUDABLE IN 9 GROSS INCOME, THEN THE PORTION OF THE DISTRIBUTION THAT IS NOT 10 INCLUDABLE IN FEDERAL GROSS INCOME IS AN ELIGIBLE ROLLOVER 11 DISTRIBUTION. 12 (3) "Employee" means a person who may become eligible for 13 membership under this act, as provided in section 13, if the 14 person's compensation is paid in whole or in part by this state. 15 (4) "Employer" or "state" means this state. 16 Sec. 5. (a) Each member of the retirement board, created by 17 this act, upon election or appointment, shall take an oath of 18 office which shall be immediately filed in the office of the sec- 19 retary of state. A majority of the retirement board shall con- 20 stitute a quorum for the transaction of business at a meeting of 21 the board. 22 (b) The business which the retirement board may perform 23 shall be conducted at a public meeting of the retirement board 24 held in compliance withAct No. 267 of the Public Acts of 1976,25being sections 15.261 to 15.275 of the Michigan Compiled Laws26 THE OPEN MEETINGS ACT, 1976 PA 267, MCL 15.261 TO 15.275. Public 27 notice of the time, date, and place of the meeting shall be given 05975'01 6 1 in the manner required byAct No. 267 of the Public Acts of21976THE OPEN MEETINGS ACT, 1976 PA 267, MCL 15.261 TO 15.275. 3 (c) The members of the retirement board shall serve without 4 compensation, but shall not suffer a loss because of absence from 5 regular employment, and shall be reimbursed for all actual neces- 6 sary expense incurred in performance of duties in accordance with 7 the statutes of this state. Notwithstanding this section, the 8 retired state employee member shall receive$35.00 per diem as9fixed by the boardTHE PER DIEM COMPENSATION ESTABLISHED ANNU- 10 ALLY BY THE LEGISLATURE for the performance of official duties by 11 attendance at regularly scheduled meetings. 12 Sec. 11. (1) There is created the employees' savings fund, 13 employer's accumulation fund, annuity reserve fund, pension 14 reserve fund, income fund, expense fund, and health insurance 15 reserve fund. 16 (2) The employees' savings fund is the fund in which shall 17 be accumulated at regular interest the contributions to the 18 retirement system deducted from the compensation of members. The 19 retirement board shall provide for the maintenance of an individ- 20 ual account for each member that shows the amount of the member's 21 contributions together with interest on those contributions. The 22 accumulated contributions of a member returned to the member upon 23 his or her withdrawal from service, or paid to the member's 24 estate or designated beneficiary in the event of the member's 25 death, as provided in this act, shall be paid from the employees' 26 savings fund. Any accumulated contributions not claimed by a 27 member or the member's legal representative as provided in this 05975'01 7 1 act within 5 years after the member's separation from state 2 service shall be transferred from the employees' savings fund to 3 the income fund. The accumulated contributions of a member, upon 4 the member's retirement, shall be transferred from the employees' 5 savings fund to the pension reserve fund. 6 (3) The employer's accumulation fund is the fund in which 7 shall be accumulated the reserves derived from money provided by 8 this state for the payment of all retirement allowances to be 9 payable to retirants and beneficiaries as provided in this act. 10 The amounts paid by this state shall be credited to the 11 employer's accumulation fund. Upon the retirement of a member, 12 or upon the member's death, if a beneficiary is entitled to a 13 retirement allowance payable from funds of the retirement system, 14 the difference between the reserve for the retirement allowance 15 to be paid on account of the member's retirement or death and the 16 member's accumulated contributions standing to his or her credit 17 in the employees' savings fund at the time of his or her retire- 18 ment or death shall be transferred from the employer's accumula- 19 tion fund to the pension reserve fund. If, in any year, the pen- 20 sion reserve fund is insufficient to cover the reserves for 21 retirement allowances and other benefits being paid from the 22 fund, the amount or amounts of the insufficiency or insufficien- 23 cies shall be transferred from the employer's accumulation fund 24 to the pension reserve fund. 25 (4) The annuity reserve fund is the fund from which shall be 26 paid all annuities, or benefits in lieu of annuities, because of 27 which reserves have been transferred from the employees' savings 05975'01 8 1 fund to the annuity reserve fund. Upon the adoption of this act, 2 the balance in the annuity reserve fund shall be transferred to 3 the pension reserve fund, and the annuities heretofore payable 4 from the annuity reserve fund shall thereafter become payable 5 from the pension reserve fund. 6 (5) The pension reserve fund is the fund from which shall be 7 paid all retirement allowances and benefits in lieu of pensions, 8 as provided in this act. For a disability retirant returned to 9 active service with this state, his or her pension reserve, com- 10 puted as of the date of return, shall be transferred from the 11 pension reserve fund to the employees' savings fund and the 12 employer's accumulation fund in the proportion that this reserve, 13 as of the date of his or her retirement, was transferred to the 14 pension reserve fund from the employees' savings fund and from 15 the employer's accumulation fund. The amounts transferred to the 16 employees' savings fund under this section shall be credited to 17 the member's individual account in the fund. 18 (6) An income fund is created for the purpose of crediting 19 regular interest on the amounts in the various other funds of the 20 retirement system with the exception of the expense fund, and to 21 provide a contingent fund out of which special requirements of 22 any of the other funds may be covered. Transfers for special 23 requirements shall be made only when the amount in the income 24 fund exceeds the ordinary requirements of the fund as evidenced 25 by a resolution of the retirement board recorded in its minutes. 26 The retirement board shall annually allow regular interest for 27 the preceding year to each of the funds enumerated in subsections 05975'01 9 1 (2), (3), (4), (5), and (8), and the amount allowed under this 2 subsection shall be due and payable to each of these funds and 3 shall be annually credited to the funds by the retirement board 4 and paid from the income fund. However, interest on contribu- 5 tions from members within a calendar year shall begin on the 6 first day of the next calendar year, and shall be credited at the 7 end of the calendar year.AllEXCEPT AS PROVIDED IN THIS 8 SUBSECTION, income, interest, and dividends derived from the 9 deposits and investments authorized by this act shall be paid 10 into the income fund. THE RETIREMENT SYSTEM SHALL DETERMINE THE 11 SHARE OF INCOME, INTEREST, AND DIVIDENDS ATTRIBUTABLE TO THE BAL- 12 ANCE IN THE HEALTH ADVANCE FUNDING SUBACCOUNT CREATED UNDER SUB- 13 SECTION (9) AND THE SHARE OF INCOME, INTEREST, AND DIVIDENDS 14 ATTRIBUTABLE TO THE HEALTH ADVANCE FUNDING SUBACCOUNT BALANCE 15 SHALL BE PAID INTO THE HEALTH ADVANCE FUNDING SUBACCOUNT. The 16 retirement board is authorized to accept gifts and bequests. Any 17 funds that come into the possession of the retirement system as a 18 gift or bequest, or any funds that may be transferred from the 19 employees' savings fund by reason of lack of claimant, or because 20 of a surplus in any fund created by this act, or any other money 21 the disposition of which is not otherwise provided for in this 22 act shall be credited to the income fund. 23 (7) The expense fund is the fund from which shall be paid 24 the expenses of the administration of this act, exclusive of 25 amounts payable as retirement allowances and other benefits pro- 26 vided for in this act. The legislature shall appropriate the 05975'01 10 1 funds necessary to defray and cover the expenses of administering 2 this act. 3 (8) The health insurance reserve fund is the fund into which 4 appropriations made by the legislature, subscriber co-payments, 5 and payments by the retirement system under section 68 for 6 health, dental, and vision insurance premiums are paid. Health, 7 dental, and vision insurance premiums payable pursuant to 8 sections 20d and 68 shall be paid from the health insurance 9 reserve fund. THE ASSETS AND ANY EARNINGS ON THE ASSETS CON- 10 TAINED IN THE HEALTH INSURANCE RESERVE FUND AND THE HEALTH 11 ADVANCE FUNDING SUBACCOUNT DESCRIBED IN SUBSECTION (9) ARE NOT TO 12 BE TREATED AS PENSION ASSETS FOR ANY PURPOSE. 13 (9) THE HEALTH ADVANCE FUNDING SUBACCOUNT IS THE ACCOUNT TO 14 WHICH AMOUNTS TRANSFERRED PURSUANT TO SECTIONS 20D, 38(6), AND 52 15 ARE CREDITED. ANY AMOUNTS RECEIVED IN THE HEALTH ADVANCE FUNDING 16 SUBACCOUNT AND ACCUMULATED EARNINGS ON THOSE AMOUNTS SHALL NOT BE 17 EXPENDED UNTIL THE ACTUARIAL ACCRUED LIABILITY FOR HEALTH BENE- 18 FITS UNDER SECTION 20D IS AT LEAST 100% FUNDED. THE DEPARTMENT 19 MAY EXPEND FUNDS OR TRANSFER FUNDS TO ANOTHER ACCOUNT TO EXPEND 20 FOR HEALTH BENEFITS UNDER SECTION 20D IF THE ACTUARIAL ACCRUED 21 LIABILITY FOR HEALTH BENEFITS UNDER SECTION 20D IS AT LEAST 100% 22 FUNDED. FOR EACH FISCAL YEAR AFTER THE FISCAL YEAR IN WHICH THE 23 ACTUARIAL ACCRUED LIABILITY FOR HEALTH BENEFITS UNDER SECTION 20D 24 IS AT LEAST 100% FUNDED BY THE HEALTH ADVANCE FUNDING SUBACCOUNT, 25 AMOUNTS RECEIVED IN THE HEALTH ADVANCE FUNDING SUBACCOUNT AND 26 ACCUMULATED EARNINGS ON THOSE AMOUNTS MAY BE EXPENDED OR CREDITED 27 TO FUND HEALTH BENEFITS UNDER SECTION 20D AS PROVIDED IN SECTION 05975'01 11 1 38(3). NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION, THE 2 DEPARTMENT MAY TRANSFER AMOUNTS FROM THE HEALTH ADVANCE FUNDING 3 SUBACCOUNT TO THE EMPLOYER'S ACCUMULATION FUND CREATED UNDER THIS 4 SECTION IF THE ACTUARIAL VALUATION PREPARED PURSUANT TO 5 SECTION 38 DEMONSTRATES THAT AS OF THE BEGINNING OF A FISCAL 6 YEAR, AND AFTER ALL CREDITS AND TRANSFERS REQUIRED BY THIS ACT 7 FOR THE PREVIOUS FISCAL YEAR HAVE BEEN MADE, THE SUM OF THE ACTU- 8 ARIAL VALUE OF ASSETS AND THE ACTUARIAL PRESENT VALUE OF FUTURE 9 NORMAL COST CONTRIBUTIONS DOES NOT EXCEED THE ACTUARIAL PRESENT 10 VALUE OF BENEFITS. 11 (10)(9)The description of the various funds in this sec- 12 tion shall be interpreted to refer to the accounting records of 13 the retirement system and not to the segregation of assets cred- 14 ited to the various funds of the retirement system. 15 Sec. 13. (1) Except as otherwise provided in this act, mem- 16 bership in the retirement system consists of state employees 17 occupying permanent positions in the state civil service. All 18 state employees except those specifically excluded by law and 19 those who are members or eligible to be members of other statu- 20 tory retirement systems in this state, shall become members of 21 the retirement system. The employees may use service previously 22 performed as an employee of this state in meeting the service 23 requirements for the retirement allowances and death benefits 24 provided by the retirement system. However, the prior service 25 shall not be used in computing the amount of a retirement allow- 26 ance to be paid by the retirement system unless the employee pays 27 to the retirement system the amount the employee's contributions 05975'01 12 1 would have been had the employee become a member immediately upon 2 employment by the state with interest compounded annually at the 3 regular rate from a date 1 year after the date of employment by 4 this state to the date of payment. A person who draws compensa- 5 tion as a state employee of a political subdivision of this state 6 is eligible for the benefits provided by this act to the extent 7 of the person's compensation paid by this state. An individual 8 who meets the requirements of section 44a is a member of the 9 retirement system. 10 (2) Elected or appointed state officials may elect not to 11 become or continue as members of the retirement system by filing 12 written notice with the retirement board. An appointed state 13 official who is a member of a state board, commission, or council 14 and who receives a per diem rate in his or her capacity as a 15 member of the board, commission, or council is excluded from mem- 16 bership in the retirement system for the service rendered in his 17 or her capacity as a member of the board, commission, or 18 council. Service performed by an elected or appointed official 19 during the time the official elects not to participate shall not 20 be used in meeting the service requirement or in computing the 21 amount of retirement allowance to be paid by the retirement 22 system. A member who elects not to participate shall be refunded 23 all contributions made before the election. 24 (3) Membership in the retirement system does not include any 25 of the following: 26 (a) A person who is a contributing member in the public 27 school employees' retirement system provided for in the public 05975'01 13 1 school employees retirement act of 1979,Act No. 300 of the2Public Acts of 1980, being sections 38.1301 to 38.1408 of the3Michigan Compiled Laws1980 PA 300, MCL 38.1301 TO 38.1408. 4 (b) A person who is a contributing member in the Michigan 5 judges retirement system provided for in the judges retirement 6 act of 1992,Act No. 234 of the Public Acts of 1992, being sec-7tions 38.2101 to 38.2608 of the Michigan Compiled Laws1992 8 PA 234, MCL 38.2101 TO 38.2670. 9 (c) A person who comes within the Michigan state police 10 retirement system provided for in the state police retirement act 11 of 1986,Act No. 182 of the Public Acts of 1986, being sections1238.1601 to 38.1648 of the Michigan Compiled Laws1986 PA 182, 13 MCL 38.1601 TO 38.1648. 14 (d) An individual who is first employed and entered upon the 15 payroll on or after March 31, 1997 for employment for which the 16 individual would have been eligible for membership under this 17 section before March 31, 1997. An individual described in this 18 subdivision is eligible to be a qualified participant in Tier 2 19 subject to sections 50 to 69. 20 (e)AnEXCEPT AS PROVIDED IN SECTION 19G, AN individual 21 who elects to terminate membership under section 50 and who, but 22 for that election, would otherwise be eligible for membership in 23 Tier 1 under this section. 24 (4) A person who is hired in state classified or unclassi- 25 fied service after June 30, 1974, who is first employed and 26 entered upon the payroll before March 31, 1997, and who possesses 27 a Michigan teaching certificate shall be a member of this 05975'01 14 1 retirement system. After June 30, 1974, but before March 31, 2 1997, a person who returns to state employment in the classified 3 or unclassified service who previously was a contributing member 4 of the Michigan public school employees' retirement system shall 5 have the person's accumulated contributions and service trans- 6 ferred to this retirement system, or having withdrawn the contri- 7 butions, may pay into the retirement system the amount withdrawn 8 together with regular interest and have credit restored as pro- 9 vided for in section 16. On and after March 31, 1997, an indi- 10 vidual described in this subsection who returns to state service 11 shall make an irrevocable election to remain in Tier 1 or to 12 become a qualified participant of Tier 2 in the manner prescribed 13 in section 50. 14 (5) A person, not regularly employed by this state, who is 15 employed through participation in 1 or more of the following pro- 16 grams, shall not be a member of the retirement system and shall 17 not receive service credit for the employment: 18 (a) A program authorized, undertaken, and financed pursuant 19 to the comprehensive employment and training act of 1973, former 20 Public Law 93-203, 87 Stat. 839. 21 (b) A summer youth employment program established pursuant 22 to the Michigan youth corps act,Act No. 69 of the Public Acts23of 1983, being sections 409.221 to 409.229 of the Michigan24Compiled Laws1983 PA 69, MCL 409.221 TO 409.229. 25 (c) A program established pursuant to the job training part- 26 nership act, Public Law 97-300, 96 Stat. 1322. 05975'01 15 1 (d) A program established pursuant to the Michigan 2 opportunity and skills training program, first established under 3 sections 12 to 23 of Act No. 259 of the Public Acts of 1983. 4 (e) A program established pursuant to the Michigan community 5 service corps program, first established under sections 25 to 35 6 of Act No. 259 of the Public Acts of 1983. 7 (6) A person, not regularly employed by this state, who is 8 employed to administer a program described in subsection (5) 9 shall not be a member of the retirement system and shall not 10 receive service credit for the employment. 11 (7) If a person described in subsection (5)(a) later becomes 12 a member of this retirement system within 12 months after the 13 date of termination as a participant in a transitional public 14 employment program, service credit shall be given for employment 15 which is excluded in subsection (5) for purposes of determining a 16 retirement allowance upon the payment by the person's employer 17 under subsection (5) from funds provided under the comprehensive 18 employment and training act of 1973, former Public Law 93-203, 19 87 Stat. 839, as funds permit, to the retirement system of the 20 contributions, plus regular interest, the employer would have 21 paid had the employment been rendered in a position covered by 22 this act. During the person's employment in the transitional 23 public employment program, the person's employer shall place in 24 reserve a reasonable but not necessarily an actuarially deter- 25 mined amount equal to the contributions that the employer would 26 have paid to the retirement system for those employees in the 27 transitional public employment program as if they were members 05975'01 16 1 under this act, but only for that number of employees that the 2 employer determined would move from the transitional public 3 employment program into positions covered by this act. If the 4 funds provided under the comprehensive employment and training 5 act of 1973, former Public Law 93-203, 87 Stat. 839, are insuffi- 6 cient, the remainder of the employer contributions shall be paid 7 by the person's current employer. 8 Sec. 19. (1) A member who is 60 years of age or older and 9 has 10 or more years of credited service or a member who is 60 10 years of age or older and has 5 or more years of credited service 11 as provided in section 20(4) or (5) may retire upon written 12 application to the retirement board, stating a date, not less13than 30 or more than 90 days after the execution and filing of14the application,on which he or she desires to retire. 15 Beginning on the retirement allowance effective date, he or she 16 shall receive a retirement allowance computed according to sec- 17 tion 20(1). 18 (2) A member who is 55 years of age or older, but less than 19 60 years of age, and has 15 or more years of credited service, 20 may retire upon written application to the retirement board stat- 21 ing a date, not less than 30 or more than 90 days after the22execution and filing of the application,on which he or she 23 desires to retire. Upon retirement he or she shall receive a 24 retirement allowance computed according to section 20(1). Except 25 as otherwise provided in this act, the retirement allowance of a 26 member who has less than 30 years of credited service shall be 27 reduced by an amount that is 0.5% of the retirement allowance 05975'01 17 1 multiplied by the number of months the person's age at retirement 2 is under 60 years. The reduction of 1/2 of 1% for each month and 3 fraction of a month from the member's retirement allowance effec- 4 tive date to the date of the member's sixtieth birthday provided 5 for in this subsection does not apply to a member who retired 6 before July 1, 1974 and before attainment of age 60, with 30 or 7 more years of credited service. The retirement allowance of a 8 retirant or beneficiary of a retirant who retired before that 9 date shall be recalculated disregarding the reduction, and the 10 person receiving the retirement allowance is eligible to receive 11 an adjusted retirement allowance based on the recalculation 12 beginning October 1, 1987, but is not eligible to receive the 13 adjusted amount attributable to any month beginning before 14 October 1, 1987. The recalculated retirement allowance provided 15 by this subsection shall be paid by January 1, 1988. The retire- 16 ment allowance of a retirant who dies before January 1, 1988, and 17 who has not nominated a retirement allowance beneficiary pursuant 18 to section 31, shall not be recalculated pursuant to this 19 subsection. 20 (3) Notwithstanding any other provision of this section, 21 effective April 1, 1988, a member may retire with a retirement 22 allowance computed according to section 20(1), without regard to 23 the reduction in subsection (2), if all of the following apply: 24 (a) The member files a written application with the retire- 25 ment board stating a date, not less than 30 or more than 90 days 26 after the execution and filing of the application, on which the 05975'01 18 1 member desires to retire, and which is within the early 2 retirement effective period. 3 (b) The member was employed by the state for the 6-month 4 period immediately preceding the member's retirement allowance 5 effective date. This subdivision does not apply to a member who 6 had been restored to active service during that 6-month period 7 pursuant to section 33. 8 (c) On the last day of the month immediately preceding the 9 retirement allowance effective date stated in the application, 10 the member's combined age and length of credited service is equal 11 to or greater than 80 years and the member is 50 years of age or 12 older. 13 (d) For purposes of this subsection, "early retirement 14 effective period" means 1 of the following: 15 (i) Except as provided in subparagraph (ii), the period 16 beginning on April 1, 1988 and ending on April 1, 1989. 17 (ii) For a member employed by a hospital or facility owned 18 or operated by the department formerly known as the department of 19 mental health that is in the process of being closed by the 20 department formerly known as the department of mental health, the 21 period beginning on April 1, 1988 and ending on October 1, 1989. 22 (4) As used in subsections (5) to (9): 23 (a) "Agency of the department" means 1 of the following: 24 (i) Southwest Michigan community living services. 25 (ii) Wayne community living services. 26 (b) "Department inpatient facility" means 1 of the 27 following: 05975'01 19 1 (i) A developmental disability center that is directly 2 operated by the department formerly known as the department of 3 mental health for purposes of providing inpatient care and treat- 4 ment services to persons with developmental disabilities. 5 (ii) A psychiatric hospital that is directly operated by the 6 department formerly known as the department of mental health for 7 purposes of providing inpatient diagnostic and therapeutic serv- 8 ices to persons who are mentally ill. 9 (5) Notwithstanding any other provision of this section, a 10 member who is an employee of an agency of the department or a 11 department inpatient facility and is on layoff status because the 12 agency or inpatient facility has been designated by the state 13 officer formerly known as the director of mental health for clo- 14 sure on or after October 1, 1989, may retire as provided in sub- 15 section (7) or (8), as applicable, with a retirement allowance 16 computed according to section 20(1), without regard to the reduc- 17 tion in subsection (2), upon satisfaction of any 1 of the follow- 18 ing conditions: 19 (a) The member is 51 years of age or older and has 25 or 20 more years of credited service, the last 5 of which are as an 21 employee of an agency of the department designated for closure or 22 a department inpatient facility designated for closure. 23 (b) The member is at least 56 years of age and has 10 or 24 more years of credited service, the last 5 of which are as an 25 employee of an agency of the department designated for closure or 26 a department inpatient facility designated for closure. 05975'01 20 1 (c) The member has 25 or more years of credited service, 2 regardless of age, as an employee of an agency of the department 3 designated for closure or a department inpatient facility desig- 4 nated for closure. 5 (6) When a department inpatient facility or agency is desig- 6 nated for closure on or after October 1, 1989, the state officer 7 formerly known as the director of mental health shall certify in 8 writing to the state legislature and the retirement board, not 9 less than 240 days before the designated official date of clo- 10 sure, which facility or agency is to be closed and the designated 11 official date of closure. 12 (7) Except as provided in subsection (8), a member who is 13 eligible to receive a retirement allowance under subsection (5) 14 may retire effective on the date that an agency of the department 15 or a department inpatient facility designated for closure as pro- 16 vided in subsection (5) actually closes, upon written application 17 to the retirement board not less than 30 or more than 180 days 18 before the designated official date of closure. Beginning on the 19 retirement allowance effective date, he or she shall receive a 20 retirement allowance computed according to section 20(1). 21 (8) A member who is on layoff status, is not working for the 22 state, and becomes eligible to receive a retirement allowance 23 under subsection (5) and who was an employee of an agency of the 24 department or a department inpatient facility that has been des- 25 ignated for closure as provided in subsection (5) and that actu- 26 ally closes on or after October 1, 1989, may retire upon written 27 application to the retirement board, stating a date, not less05975'01 21 1than 30 or more than 180 days after the facility actually2closes,upon which he or she wishes to retire. Beginning on the 3 retirement allowance effective date, he or she shall receive a 4 retirement allowance computed according to section 20(1). 5 (9) Any additional accrued actuarial cost and costs for 6 health insurance resulting from the implementation of subsection 7 (5) shall be funded from appropriations to the department 8 formerly known as the department of mental health for this 9 purpose. 10 (10) A member who is an employee of the state accident fund 11 on the date of transfer to a permitted transferee as that term is 12 defined by section 701a of the worker's disability compensation 13 act of 1969, 1969 PA 317, MCL 418.701a, may retire if the 14 member's age and his or her length of service is equal to or 15 greater than 70 years on the date of transfer. The member may 16 retire upon written application to the retirement board, stating 17 a date, not less than 30 or more than 90 days after the execution 18 and filing of the application, on which he or she desires to 19 retire. Beginning on the retirement allowance effective date, he 20 or she shall receive a retirement allowance computed according to 21 section 20(1) without regard to the reduction required by subsec- 22 tion (2). 23 (11) A member who is an employee of the Michigan biologic 24 products institute on the date the institute is conveyed pursuant 25 to the Michigan biologic products institute transfer act, 1996 26 PA 522, MCL 333.26331 to 333.26340, may retire if the member's 27 age and his or her length of service is equal to or greater than 05975'01 22 1 70 years on the date of the conveyance. The member may retire 2 upon written application to the retirement board, stating a date, 3 not less than 30 or more than 90 days after the execution and 4 filing of the application, on which he or she desires to retire. 5 Beginning on the retirement allowance effective date, he or she 6 shall receive a retirement allowance computed according to 7 section 20(1) without regard to the reduction required by 8 subsection (2). 9 (12) A member who is an employee of the liquor control com- 10 mission created by section5 of the Michigan liquor control act,111933 (Ex Sess) PA 8, MCL 436.5209 OF THE MICHIGAN LIQUOR CON- 12 TROL CODE OF 1998, 1998 PA 5, MCL 436.1209, whose employment is 13 terminated due to the privatization of the distribution of spir- 14 its within this state is effectuated pursuant to the resolution 15 and order adopted by the liquor control commission on February 7, 16 1996, a plan adopted pursuant to statute or court order, or a 17 plan adopted pursuant to both statute and order of the liquor 18 control commission may retire if the member's age and his or her 19 length of service is equal to or greater than 70 years on the 20 date the privatization is effectuated. The member may retire 21 under this subsection upon written application to the retirement 22 board, stating a date, not less than 30 or more than 90 days 23 after the execution and filing of the application, on which he or 24 she desires to retire. Beginning on the retirement allowance 25 effective date, he or she shall receive a retirement allowance 26 computed according to section 20(1), without regard to the 27 reduction required by subsection (2). The cost of benefits paid 05975'01 23 1 under this section shall be paid out of the revolving fund 2 created under section10221 of the Michigan liquor control 3act, 1933 (Ex Sess) PA 8, MCL 436.10CODE OF 1998, 1998 PA 58, 4 MCL 436.1221. 5 SEC. 19G. (1) NOTWITHSTANDING SECTION 19, A MEMBER MAY 6 RETIRE AND RECEIVE A RETIREMENT ALLOWANCE COMPUTED UNDER THIS 7 SECTION IF THE MEMBER MEETS ALL OF THE FOLLOWING REQUIREMENTS: 8 (A) ON OR BEFORE NOVEMBER 1, 2002, OR ON THE EFFECTIVE DATE 9 OF HIS OR HER RETIREMENT, WHICHEVER IS EARLIER, THE MEMBER MEETS 10 1 OR MORE OF THE FOLLOWING: 11 (i) THE MEMBER'S COMBINED AGE AND LENGTH OF CREDITED SERVICE 12 IS EQUAL TO OR GREATER THAN 80 YEARS. 13 (ii) THE MEMBER IS 60 YEARS OF AGE OR OLDER AND HAS 10 OR 14 MORE YEARS OF CREDITED SERVICE. 15 (B) THE MEMBER IS WITHIN THE CLASSIFIED STATE CIVIL SERVICE, 16 IS AN EMPLOYEE OF THE JUDICIAL BRANCH, OR IS AN INDIVIDUAL NOT 17 DESCRIBED IN SUBSECTION (2)(B). 18 (C) THE MEMBER WAS EMPLOYED BY THIS STATE FOR THE 6-MONTH 19 PERIOD ENDING ON THE EFFECTIVE DATE OF HIS OR HER RETIREMENT OR 20 WAS AN EMPLOYEE OF THE STATE JUDICIAL COUNCIL ON SEPTEMBER 30, 21 1996 AS DESCRIBED IN SECTION 44A. A MEMBER WHO IS ON LAYOFF 22 STATUS FROM STATE EMPLOYMENT IS CONSIDERED TO HAVE MET THE 23 EMPLOYMENT REQUIREMENT OF THIS SUBDIVISION. 24 (D) EXCEPT AS MAY BE PROVIDED OTHERWISE IN SUBSECTION (5), 25 THE MEMBER EXECUTES AND FILES A WRITTEN APPLICATION WITH THE 26 RETIREMENT BOARD, ON OR AFTER APRIL 1, 2002, BUT NOT LATER THAN 27 APRIL 30, 2002, STATING A DATE ON OR AFTER JULY 1, 2002, BUT NOT 05975'01 24 1 LATER THAN NOVEMBER 1, 2002, ON WHICH HE OR SHE DESIRES TO 2 RETIRE. A MEMBER MAY WITHDRAW A WRITTEN APPLICATION ON OR BEFORE 3 MAY 15, 2002. A WRITTEN APPLICATION SUBMITTED BY A MEMBER AND 4 NOT WITHDRAWN ON OR BEFORE MAY 15, 2002 IS IRREVOCABLE. 5 (E) THE MEMBER IS NOT EMPLOYED IN A COVERED POSITION AS 6 DEFINED IN SECTION 45. 7 (F) THE MEMBER IS NOT A CONSERVATION OFFICER AS DESCRIBED IN 8 SECTION 48. 9 (2) NOTWITHSTANDING SECTION 19, A MEMBER MAY RETIRE AND 10 RECEIVE A RETIREMENT ALLOWANCE COMPUTED UNDER THIS SECTION IF THE 11 MEMBER MEETS ALL OF THE FOLLOWING REQUIREMENTS: 12 (A) ON OR BEFORE NOVEMBER 1, 2002, OR ON THE EFFECTIVE DATE 13 OF HIS OR HER RETIREMENT, WHICHEVER IS EARLIER, THE MEMBER'S COM- 14 BINED AGE AND LENGTH OF CREDITED SERVICE IS EQUAL TO OR GREATER 15 THAN 80 YEARS OR THE MEMBER IS 60 YEARS OF AGE OR OLDER AND HAS 16 10 OR MORE YEARS OF CREDITED SERVICE. 17 (B) THE MEMBER IS AN EMPLOYEE OF THE LEGISLATURE, IS AN 18 EMPLOYEE OF THE OFFICE OF GOVERNOR, OR IS AN UNCLASSIFIED 19 EMPLOYEE WITHIN THE STATE CIVIL SERVICE. 20 (C) THE MEMBER WAS EMPLOYED BY THIS STATE OR THE LEGISLATURE 21 FOR THE 6-MONTH PERIOD ENDING ON THE EFFECTIVE DATE OF HIS OR HER 22 RETIREMENT. A MEMBER WHO IS ON LAYOFF STATUS FROM STATE EMPLOY- 23 MENT IS CONSIDERED TO HAVE MET THE EMPLOYMENT REQUIREMENT OF THIS 24 SUBDIVISION. 25 (D) THE MEMBER EXECUTES AND FILES A WRITTEN APPLICATION WITH 26 THE RETIREMENT BOARD, ON OR AFTER APRIL 1, 2002, BUT NOT LATER 27 THAN APRIL 30, 2002, STATING A DATE ON OR AFTER JULY 1, 2002, BUT 05975'01 25 1 NOT LATER THAN NOVEMBER 1, 2002, ON WHICH HE OR SHE DESIRES TO 2 RETIRE. A MEMBER MAY WITHDRAW A WRITTEN APPLICATION ON OR BEFORE 3 MAY 15, 2002. A WRITTEN APPLICATION SUBMITTED BY A MEMBER AND 4 NOT WITHDRAWN ON OR BEFORE MAY 15, 2002 IS IRREVOCABLE. THIS 5 SUBDIVISION IS SUBJECT TO SUBSECTION (5). 6 (E) THE MEMBER IS NOT EMPLOYED IN A COVERED POSITION AS 7 DEFINED IN SECTION 45. 8 (F) THE MEMBER IS NOT A CONSERVATION OFFICER AS DESCRIBED IN 9 SECTION 48. 10 (3) ANY AMOUNT THAT A MEMBER RETIRING UNDER THIS SECTION 11 WOULD OTHERWISE BE ENTITLED TO RECEIVE IN A LUMP SUM AT RETIRE- 12 MENT ON ACCOUNT OF ACCUMULATED SICK LEAVE SHALL BE PAID IN 60 13 CONSECUTIVE EQUAL MONTHLY INSTALLMENTS BEGINNING ON OR AFTER 14 OCTOBER 1, 2002. PAYMENTS RECEIVED UNDER THIS SUBSECTION MAY NOT 15 BE USED TO PURCHASE SERVICE CREDIT UNDER THIS ACT. THESE PAY- 16 MENTS FOR ACCUMULATED SICK LEAVE ARE TO BE PAID FROM FUNDS APPRO- 17 PRIATED TO THE APPOINTING AUTHORITY AND NOT FROM FUNDS OF THE 18 RETIREMENT SYSTEM. THESE PAYMENTS SHALL BE CONSIDERED TAXABLE 19 INCOME UNDER THE INCOME TAX ACT OF 1967, 1967 PA 281, MCL 206.1 20 TO 206.532. 21 (4) ANY AMOUNT THAT A MEMBER RETIRING UNDER THIS SECTION IS 22 ENTITLED TO RECEIVE IN A LUMP SUM AT RETIREMENT ON ACCOUNT OF 23 ACCUMULATED ANNUAL LEAVE SHALL BE PAID ON OR AFTER OCTOBER 1, 24 2002. 25 (5) THE DIRECTOR OF A PRINCIPAL DEPARTMENT MAY REQUEST THAT 26 THE EFFECTIVE DATE OF RETIREMENT UNDER SUBSECTION (1) OF A MEMBER 27 EMPLOYED BY THAT DEPARTMENT BE EXTENDED TO A DATE NOT LATER THAN 05975'01 26 1 FEBRUARY 1, 2004. TO MAKE A REQUEST UNDER THIS SUBSECTION, THE 2 DIRECTOR SHALL SUBMIT A WRITTEN REQUEST AND THE WRITTEN CONCUR- 3 RENCE OF THE MEMBER TO THE OFFICE OF THE STATE EMPLOYER AND THE 4 STATE BUDGET OFFICE ON OR BEFORE MAY 31, 2002. UPON RECEIPT OF 5 THE WRITTEN REQUEST AND CONCURRENCE, THE OFFICE OF THE STATE 6 EMPLOYER AND THE STATE BUDGET OFFICE MAY EXTEND THE EFFECTIVE 7 DATE OF RETIREMENT OF A MEMBER OTHERWISE ELIGIBLE TO RETIRE UNDER 8 SUBSECTION (1) TO A DATE NOT LATER THAN FEBRUARY 1, 2004. UPON 9 WRITTEN APPROVAL OF THE SENATE MAJORITY LEADER FOR A MEMBER WHO 10 IS AN EMPLOYEE OF THE SENATE, THE SPEAKER OF THE HOUSE OF REPRE- 11 SENTATIVES FOR A MEMBER WHO IS AN EMPLOYEE OF THE HOUSE OF REPRE- 12 SENTATIVES, THE SENATE MAJORITY LEADER AND THE SPEAKER OF THE 13 HOUSE OF REPRESENTATIVES FOR A MEMBER WHO IS AN EMPLOYEE OF THE 14 OFFICE OF THE AUDITOR GENERAL, OR THE CHAIR AND ALTERNATE CHAIR 15 OF THE LEGISLATIVE COUNCIL FOR A MEMBER WHO IS AN EMPLOYEE OF AN 16 AGENCY UNDER THE JURISDICTION OF THE LEGISLATIVE COUNCIL, AND 17 UPON WRITTEN CONCURRENCE OF THE MEMBER, THE EFFECTIVE DATE OF 18 RETIREMENT FOR THAT MEMBER UNDER SUBSECTION (2) MAY BE EXTENDED 19 TO A DATE NOT LATER THAN FEBRUARY 1, 2004. UPON WRITTEN APPROVAL 20 OF THE CHIEF JUSTICE FOR A MEMBER WHO IS AN EMPLOYEE OF THE JUDI- 21 CIAL BRANCH, INCLUDING, BUT NOT LIMITED TO, MEMBERS DESCRIBED IN 22 SECTION 44A, AND UPON WRITTEN CONCURRENCE OF THE MEMBER, THE 23 EFFECTIVE DATE OF RETIREMENT FOR THAT MEMBER UNDER SUBSECTION (1) 24 MAY BE EXTENDED TO A DATE NOT LATER THAN FEBRUARY 1, 2004. THE 25 INDIVIDUAL OR INDIVIDUALS WHO APPROVE THE EXTENSION OF AN EFFEC- 26 TIVE DATE OF RETIREMENT FOR A MEMBER WHO IS AN EMPLOYEE OF THE 27 LEGISLATURE, SUPREME COURT, OR COURT OF APPEALS SHALL SUBMIT 05975'01 27 1 WRITTEN NOTIFICATION TO THE OFFICE OF RETIREMENT SERVICES OF ALL 2 EXTENSIONS APPROVED ON OR BEFORE MAY 31, 2002. 3 (6) UPON HIS OR HER RETIREMENT AS PROVIDED IN THIS SECTION, 4 A MEMBER WHO DID NOT MAKE AN ELECTION UNDER SECTION 50 TO TERMI- 5 NATE MEMBERSHIP IN TIER 1 AND BECOME A QUALIFIED PARTICIPANT IN 6 TIER 2 SHALL RECEIVE A RETIREMENT ALLOWANCE EQUAL TO THE MEMBER'S 7 NUMBER OF YEARS AND FRACTION OF A YEAR OF CREDITED SERVICE MULTI- 8 PLIED BY 1-3/4% OF HIS OR HER FINAL AVERAGE COMPENSATION. EXCEPT 9 FOR THE CALCULATION PROVIDED IN THIS SUBSECTION, THE MEMBER'S 10 RETIREMENT ALLOWANCE IS SUBJECT TO SECTION 20. THE MEMBER'S 11 RETIREMENT ALLOWANCE IS NOT SUBJECT TO REDUCTION PURSUANT TO 12 SECTION 19(2). 13 (7) UPON HIS OR HER RETIREMENT AS PROVIDED IN THIS SECTION, 14 A FORMER MEMBER WHO MADE AN ELECTION UNDER SECTION 50 TO TERMI- 15 NATE MEMBERSHIP IN TIER 1 AND BECOME A QUALIFIED PARTICIPANT IN 16 TIER 2 SHALL RECEIVE A RETIREMENT ALLOWANCE EQUAL TO THE MEMBER'S 17 NUMBER OF YEARS AND FRACTION OF A YEAR OF CREDITED SERVICE MULTI- 18 PLIED BY 1/4% OF HIS OR HER FINAL AVERAGE COMPENSATION. EXCEPT 19 FOR THE CALCULATION PROVIDED IN THIS SUBSECTION, THE FORMER 20 MEMBER'S RETIREMENT ALLOWANCE IS SUBJECT TO SECTION 20. THE 21 FORMER MEMBER'S RETIREMENT ALLOWANCE IS NOT SUBJECT TO REDUCTION 22 PURSUANT TO SECTION 19(2). 23 (8) FOR PURPOSES OF THIS SECTION, AN INDIVIDUAL WHO ELECTED 24 TO TERMINATE MEMBERSHIP UNDER SECTION 50 AND WHO, BUT FOR THAT 25 ELECTION, WOULD OTHERWISE BE ELIGIBLE FOR MEMBERSHIP IN TIER 1 26 UNDER SECTION 13, SHALL BE CONSIDERED A MEMBER OF TIER 1 FOR THE 05975'01 28 1 LIMITED PURPOSE OF RECEIVING A RETIREMENT ALLOWANCE CALCULATED 2 UNDER THIS SECTION AND PAID BY THE RETIREMENT SYSTEM. 3 Sec. 20. (1) Upon his or her retirement, as provided for in 4 section 19, 19a, 19b, 19c, or 19d, a member shall receive a 5 retirement allowance equal to the member's number of years and 6 fraction of a year of credited service multiplied by 1-1/2% of 7 his or her final average compensation. The member's retirement 8 allowance is subject to subsection (3). Upon his or her retire- 9 ment, the member may elect an option provided for in 10 section 31(1). 11 (2) Pursuant to rules promulgated by the retirement board, a 12 member who retires before becoming 65 years of age may elect to 13 have his or her regular retirement allowance equated on an actu- 14 arial basis to provide an increased retirement allowance payable 15 up to his or her attainment of 65 years of age and a reduced 16 retirement allowance payable after his or her attainment of 65 17 years of age. His or her increased retirement allowance payable 18 up to age 65 shall approximately equal the sum of his or her 19 reduced retirement allowance payable after age 65 and his or her 20 estimated social security primary insurance amount. In addition, 21 upon retirement the member may elect an option provided for in 22 section 31(1). 23 (3) If a retirant dies before receiving payment of his or 24 her retirement allowance in an aggregate amount equal to the 25 retirant's accumulated contributions credited to the retirant in 26 the employees' savings fund at the time of his or her retirement, 27 the difference between his or her accumulated contributions and 05975'01 29 1 the amount of retirement allowance received by him or her shall 2 be paid to the person or persons that he or she nominated by 3 written designationdulyexecuted and filed with the retirement 4 board. If the person or persons do not survive the retirant, 5 then the difference, if any, shall be paid to the retirant's 6 legal representative or estate. Benefits shall not be paid under 7 this subsection on account of the death of the retirant if he or 8 she elected an option provided for in section 31(1). 9 (4) If a member has 10 or more years of credited service, or 10 has 5 or more years of credited service as an elected officer or 11 in a position in the executive branch or the legislative branch 12 excepted or exempt from the classified state civil service as 13 provided in section 5 of article XI of the state constitution of 14 1963, and is separated from the service of the state for a reason 15 other than retirement or death, he or she shall remain a member 16 during the period of absence from the state service for the 17 exclusive purpose of receiving a retirement allowance provided 18 for in this section. If a former employee of the state accident 19 fund who had 5 or more years of service as an employee of the 20 state accident fund returns to employment with the state before 21 receiving a retirement allowance under this act, the employee 22 shall be required to accumulate 10 or more years of credited 23 service before receiving a retirement allowance under this act. 24 If a former employee of the Michigan biologic products institute 25 who is eligible to and has elected to purchase additional cred- 26 ited service pursuant to section 17l(2) returns to employment 27 with the state before receiving a retirement allowance under this 05975'01 30 1 act, the employee shall be required to accumulate 10 or more 2 years of credited service, without regard to the additional cred- 3 ited service purchased pursuant to section 17l(2) but including 4 any credited service authorized under section 16, before receiv- 5 ing a retirement allowance under this act. If the member with- 6 draws all or part of his or her accumulated contributions, he or 7 she ceases to be a member. Upon becoming 60 years of age or 8 older, the member may retire upon his or her written application 9 to the retirement board as provided in section 19(1). If a 10 member elects an option as provided under section 31(4), but dies 11 before the effective date of his or her retirement, the option 12 elected by the member shall be carried out, and the beneficiary 13 of the member is entitled to all advantages due under that 14 option. 15 (5) A person who is a member after January 1, 1981, who has 16 at least 5 years of credited service, and whose employment with 17 the department formerly known as the department of mental health 18 is terminated by reason of reduction in force related to deinsti- 19 tutionalization that may or may not result in facility closure, 20 shall remain a member during the period of absence from the state 21 service for the exclusive purpose of receiving a service retire- 22 ment allowance as provided in this subsection. As used in this 23 subsection, "deinstitutionalization" means planned reduction of 24 state center or hospital beds through placement of individuals 25 from the hospital or facility, or through limiting admissions to 26 centers and hospitals, or both. If a member withdraws all or 27 part of the member's accumulated contributions, the member ceases 05975'01 31 1 to be a member. Upon becoming 60 years of age or older, the 2 member may retire upon written application to the retirement 3 board. The application shall specify a date, not less than 304days or more than 90 days after the execution and filing of the5application,on which the member desires to retire. Upon 6 retirement, the member shall receive a retirement allowance equal 7 to the number of years and fraction of a year of credited state 8 service multiplied by 1-1/2% of the member's final average 9 compensation. Upon retirement, the member may elect an option 10 provided in section 31(1). If the member elects an option pro- 11 vided for in section 31(4), but dies before the effective date of 12 retirement, the option elected by the member shall be carried 13 out, and a beneficiary of the member is entitled to all advan- 14 tages due under the option. 15 (6) A retirant or the beneficiary of a retirant who retired 16 before July 1, 1974 shall have his or her retirement allowance 17 recalculated based on the retirant's number of years and fraction 18 of a year of credited service multiplied by 1.5% of his or her 19 final average compensation. The retirant or beneficiary is eli- 20 gible to receive the recalculated retirement allowance beginning 21 October 1, 1987, but is not eligible to receive the adjusted 22 amount attributable to any month beginning before October 1, 23 1987. The recalculated retirement allowance provided by this 24 subsection shall be paid by January 1, 1988 and shall be the 25 basis on which future adjustments to the allowance, including the 26 supplement provided by section 20h, are calculated. The 27 retirement allowance of a retirant who dies before January 1, 05975'01 32 1 1988, and who did not nominate a retirement allowance beneficiary 2 pursuant to section 31, shall not be recalculated pursuant to 3 this subsection. 4 (7) Each retirement allowance payable under this act shall 5 date from the first of the month following the month in which the 6 applicant satisfies the age and service or other requirements for 7 receiving the retirement allowance and terminates state service. 8 A full month's retirement allowance is payable for the month in 9 which a retirement allowance ceases. 10 (8) An employee of the state accident fund who has 5 or more 11 but less than 10 years of credited service as of the effective 12 date of the transfer authorized by section 701a of the worker's 13 disability compensation act of 1969,Act No. 317 of the Public14Acts of 1969, being section 418.701a of the Michigan Compiled15Laws1969 PA 317, MCL 418.701A, and who is permitted to receive 16 a retirement allowance under subsection (4) is eligible for 17 health care benefits under section 20d on the date of his or her 18 retirement to the same extent as a member with 10 years of cred- 19 ited service who vested on the same date. 20 (9) An employee of the Michigan biologic products institute 21 who has 5 or more but less than 10 years of credited service as 22 of the effective date of the conveyance authorized by the 23 Michigan biologic products institute transfer act and who is per- 24 mitted to receive a retirement allowance under subsection (4) is 25 eligible for health care benefits under section 20d on the date 26 of his or her retirement to the same extent as a member with 10 27 years of credited service who vested on the same date. 05975'01 33 1 Sec. 20d. (1) On and after July 1, 1974, hospitalization 2 and medical coverage insurance premium payable by any retirant or 3 his or her beneficiary and his or her dependents under any group 4 health plan authorized by the Michigan civil service commission 5 and the department of management and budget shall be paid by the 6 retirement board from the health insurance reserve fund created 7 in section 11. The amount payable shall be in the same propor- 8 tion of premium payable by the state of Michigan for the classi- 9 fied employees occupying positions in the state civil service. 10 The hospitalization and medical insurance premium payable shall 11 be paid from appropriations made for this purpose to the health 12 insurance reserve fund sufficient to cover the premium payment 13 needed to be made. 14 (2) Effective January 1, 1988, 90% of the premium payable by 15 a retirant or the retirant's beneficiary and his or her depen- 16 dents for dental coverage or vision coverage, or both, under any 17 group plan authorized by the Michigan civil service commission 18 and the department of management and budget shall be paid by the 19 retirement board from the health insurance reserve fund created 20 in section 11. 21 (3) THE DEPARTMENT OF MANAGEMENT AND BUDGET SHALL CALCULATE 22 FOR EACH FISCAL YEAR ANY COST SAVINGS THAT HAVE ACCRUED TO THIS 23 STATE AS A RESULT OF THE IMPLEMENTATION OF 1996 PA 487 OVER THE 24 COSTS THAT WOULD HAVE BEEN INCURRED BY THIS STATE TO FUND PREMI- 25 UMS PAYABLE PURSUANT TO SECTION 68 HAD 1996 PA 487 NOT BEEN 26 IMPLEMENTED. THE TOTAL AMOUNT OF THE COST SAVINGS, IF ANY, SHALL 05975'01 34 1 BE ALLOCATED TO THE HEALTH ADVANCE FUNDING SUBACCOUNT CREATED 2 UNDER SECTION 11(9). 3 (4)(3)On and after March 31, 1997, the retirement system 4 shall also pay health insurance premiums described in this sec- 5 tion in the manner prescribed in section 68. 6 (5)(4)For purposes of this section, "retirant" includes 7 a person who retires under section 306 or 410 of the Michigan 8 military act,Act No. 150 of the Public Acts of 1967, being9sections 32.706 and 32.810 of the Michigan Compiled Laws1967 10 PA 150, MCL 32.706 AND 32.810. 11 Sec. 21.Subject to the provisions of sections 33 and 34,12upon the application of a member, or his department head, or the13state personnel director, a member who becomes totally incapaci-14tated for duty in the service of the state of Michigan without15willful negligence on his part, by reason of a personal injury or16disease, which the retirement board finds to have occurred as the17natural and proximate result of the said member's actual per-18formance of duty in the service of the state, shall be retired:19Provided, The medical advisor after a medical examination of said20member shall certify in writing that said member is mentally or21physically totally incapacitated for the further performance of22duty in the service of the state, and that such incapacity will23probably be permanent, and that said member should be retired:24And provided further, That the retirement board concurs in the25recommendation of the medical advisor.26 (1) EXCEPT AS MAY BE PROVIDED OTHERWISE IN SECTIONS 33 AND 27 34, A MEMBER WHO BECOMES TOTALLY INCAPACITATED FOR DUTY BECAUSE 05975'01 35 1 OF A PERSONAL INJURY OR DISEASE SHALL BE RETIRED, IF ALL OF THE 2 FOLLOWING APPLY: 3 (A) THE MEMBER, THE MEMBER'S PERSONAL REPRESENTATIVE OR 4 GUARDIAN, THE MEMBER'S DEPARTMENT HEAD, OR THE STATE PERSONNEL 5 DIRECTOR FILES AN APPLICATION ON BEHALF OF THE MEMBER WITH THE 6 RETIREMENT BOARD NO LATER THAN 1 YEAR AFTER TERMINATION OF THE 7 MEMBER'S EMPLOYMENT. 8 (B) THE RETIREMENT BOARD FINDS THAT THE MEMBER'S PERSONAL 9 INJURY OR DISEASE IS THE NATURAL AND PROXIMATE RESULT OF THE 10 MEMBER'S PERFORMANCE OF DUTY. 11 (C) A MEDICAL ADVISOR CONDUCTS A MEDICAL EXAMINATION OF THE 12 MEMBER AND CERTIFIES IN WRITING THAT THE MEMBER IS MENTALLY OR 13 PHYSICALLY TOTALLY INCAPACITATED FOR FURTHER PERFORMANCE OF DUTY, 14 THAT THE TOTAL INCAPACITATION IS PROBABLY PERMANENT, AND THAT THE 15 MEMBER SHOULD BE RETIRED. 16 (D) THE RETIREMENT BOARD CONCURS IN THE RECOMMENDATION OF 17 THE MEDICAL ADVISOR. 18 (2) UPON APPEAL TO THE RETIREMENT BOARD, THE RETIREMENT 19 BOARD, FOR GOOD CAUSE, MAY ACCEPT AN APPLICATION FOR A DISABILITY 20 RETIREMENT ALLOWANCE NOT LATER THAN 2 YEARS AFTER TERMINATION OF 21 THE MEMBER'S STATE EMPLOYMENT. 22 Sec. 24.Subject to the provisions of sections 33 and 34,23upon application of a member, or his department head, or the24state personnel director, a member who has been a state employee25at least 10 years becomes totally and permanently incapacitated26for duty as the result of causes occurring not in the performance27of duty to the state, may be retired by the retirement board:05975'01 36 1Provided, The medical advisor after a medical examination of such2member, shall certify that such member is mentally or physically3incapacitated for the further performance of duty, and such inca-4pacity is likely to be permanent and that such member should be5retired.6 (1) EXCEPT AS MAY OTHERWISE BE PROVIDED IN SECTIONS 33 AND 7 34, A MEMBER WHO BECOMES TOTALLY INCAPACITATED FOR DUTY BECAUSE 8 OF A PERSONAL INJURY OR DISEASE THAT IS NOT THE NATURAL AND PROX- 9 IMATE RESULT OF THE MEMBER'S PERFORMANCE OF DUTY MAY BE RETIRED 10 IF ALL OF THE FOLLOWING APPLY: 11 (A) THE MEMBER, THE MEMBER'S PERSONAL REPRESENTATIVE OR 12 GUARDIAN, THE MEMBER'S DEPARTMENT HEAD, OR THE STATE PERSONNEL 13 DIRECTOR FILES AN APPLICATION ON BEHALF OF THE MEMBER WITH THE 14 RETIREMENT BOARD NO LATER THAN 1 YEAR AFTER TERMINATION OF THE 15 MEMBER'S STATE EMPLOYMENT. 16 (B) A MEDICAL ADVISOR CONDUCTS A MEDICAL EXAMINATION OF THE 17 MEMBER AND CERTIFIES IN WRITING THAT THE MEMBER IS MENTALLY OR 18 PHYSICALLY TOTALLY INCAPACITATED FOR FURTHER PERFORMANCE OF DUTY, 19 THAT THE INCAPACITATION IS LIKELY TO BE PERMANENT, AND THAT THE 20 MEMBER SHOULD BE RETIRED. 21 (C) THE MEMBER HAS BEEN A STATE EMPLOYEE FOR AT LEAST 10 22 YEARS. 23 (2) UPON APPEAL TO THE RETIREMENT BOARD, THE RETIREMENT 24 BOARD, FOR GOOD CAUSE, MAY ACCEPT AN APPLICATION FOR A DISABILITY 25 RETIREMENT ALLOWANCE NOT LATER THAN 2 YEARS AFTER TERMINATION OF 26 THE MEMBER'S STATE EMPLOYMENT. 05975'01 37 1 Sec. 33. (a)Once each year during the first 5 years2following the retirement of a member on a disability retirement3allowance, and at least once in every 3 year period thereafter4theTHE retirement board may, and upon the retirant's applica- 5 tion shall, require any disability retirant,who has not 6 attained age 60 years,to undergo a medical examination.;7suchTHE examination IS to be made by or under the direction of 8 the medical advisor at the RETIRANT'S place of residenceof said9retirant,or other place mutually agreed upon. Should any dis- 10 ability retirant,who has not attained age 60 years,refuse 11 to submit tosuchTHE medical examination,in any such12period,his OR HER disability retirement allowance may be dis- 13 continued until his OR HER withdrawal ofsuchTHE refusal.,14and should suchIF THE refusalcontinueCONTINUES for 1 year, 15 allhisrights in and to his OR HER disability retirement 16 allowance may be revoked by the retirement board. If uponsuch17 THE medical examination of a disability retirant, the medical 18 advisor reports and his OR HER report is concurred in by the 19 retirement board, that the disability retirant is physically able 20 and capable of resuming employment,he shall be restored to21active service with the state andhis OR HER disability retire- 22 ment allowance shall cease AFTER 6 MONTHS. 23 (b)ShouldIF the secretaryreportREPORTS andcertify24 CERTIFIES to the retirement board thatsuchA disability bene- 25 ficiary is engaged in a gainful occupation paying more than the 26 difference between his OR HER disability retirement allowance and 27 his OR HER final compensation, andshouldIF the retirement 05975'01 38 1 boardconcurCONCURS insuchTHE report, then the amount of 2 his OR HER retirement allowance shall be reduced to an amount 3 which together with the amount earned by him OR HER shall equal 4 his OR HER final compensation. Should the earnings ofsuchTHE 5 disability retirant be later changed, the amount of his OR HER 6 retirement allowance shall be further modified in like manner. 7 Sec. 38. (1) The annual level percent of payroll contribu- 8 tion rate to finance the benefits provided under this act shall 9 be determined by actuarial valuation pursuant to subsections (2) 10 and (3), upon the basis of the risk assumptions adopted by the 11 retirement board with approval of the department of management 12 and budget, and in consultation with the investment counsel and 13 the actuary. An annual actuarial valuation shall be made of the 14 retirement system in order to determine the actuarial condition 15 of the retirement system and the required contribution to the 16 retirement system. The actuary shall report to the legislature 17 by April 15 of each year on the actuarial condition of the 18 retirement system as of the end of the previous fiscal year and 19 on the projections of state contributions for the next fiscal 20 year. The actuary shall certify in the report that the tech- 21 niques and methodologies used are generally accepted within the 22 actuarial profession and that the assumptions and cost estimates 23 used fall within the range of reasonable and prudent assumptions 24 and cost estimates. An annual actuarial gain-loss experience 25 study of the retirement system shall be made in order to deter- 26 mine the financial effect of variations of actual retirement 27 system experience from projected experience. 05975'01 39 1 (2) The contribution rate for monthly benefits payable in 2 the event of the death of a member before retirement or the dis- 3 ability of a member shall be computed using a terminal funding 4 method of actuarial valuation. 5 (3) Except as otherwise provided in this subsection, the 6 contribution rate for benefits other than those provided for in 7 subsection (2) shall be computed using an individual projected 8 benefit entry age normal cost method of valuation. For the 9 1995-96 state fiscal year and for each subsequent fiscal year IN 10 WHICH THE ACTUARIAL ACCRUED LIABILITY FOR HEALTH BENEFITS IS LESS 11 THAN 100% FUNDED, the contribution rate for benefits provided 12 under section 20d shall be computed using a cash disbursement 13 method. BEGINNING IN THE FISCAL YEAR AFTER THE FISCAL YEAR IN 14 WHICH THE ACTUARIAL ACCRUED LIABILITY FOR HEALTH BENEFITS UNDER 15 SECTION 20D IS AT LEAST 100% FUNDED BY THE HEALTH ADVANCE FUNDING 16 SUBACCOUNT CREATED UNDER SECTION 11(9), AND CONTINUING FOR EACH 17 SUBSEQUENT FISCAL YEAR, THE CONTRIBUTION RATE FOR HEALTH BENEFITS 18 PROVIDED UNDER SECTION 20D SHALL BE COMPUTED USING AN INDIVIDUAL 19 PROJECTED BENEFIT ENTRY AGE NORMAL COST METHOD OF VALUATION. The 20 contribution rate for service that may be rendered in the current 21 year, the normal cost contribution rate, shall be equal to the 22 aggregate amount of individual entry age normal costs divided by 23 1% of the aggregate amount of active members' valuation 24 compensation. The unfunded actuarial accrued liability shall be 25 equal to the actuarial present value of benefits reduced by the 26 actuarial present value of future normal cost contributions and 27 the actuarial value of assets on the valuation date. The 05975'01 40 1 unfunded actuarial accrued liability shall be amortized in 2 accordance with generally accepted governmental accounting stan- 3 dards over a period equal to or less than 40 years. 4 (4) The legislature annually shall appropriate to the 5 retirement system the amount determined pursuant to subsections 6 (2) and (3). The state treasurer shall transfer monthly to the 7 retirement system an amount equal to the product of the contribu- 8 tion rates determined in subsections (2) and (3) times the aggre- 9 gate amount of active member compensation paid during that 10 month. Not later than 60 days after the termination of each 11 state fiscal year, the executive secretary of the retirement 12 board shall certify to the director of the department of manage- 13 ment and budget the actual aggregate compensations paid to active 14 members during the preceding state fiscal year. Upon receipt of 15 that certification, the director of the department of management 16 and budget shall compute the difference, if any, between actual 17 state contributions received during the preceding state fiscal 18 year and the product of the contribution rates determined in sub- 19 sections (2) and (3) times the aggregate compensations paid to 20 active members during the preceding state fiscal year. Except as 21 otherwise provided in subsection (5), the difference, if any, 22 shall be submitted in the executive budget to the legislature for 23 appropriation in the next succeeding state fiscal year. THIS 24 SUBSECTION DOES NOT APPLY FOR THOSE FISCAL YEARS IN WHICH A 25 DEPOSIT OCCURS PURSUANT TO SUBSECTION (6). 26 (5) For differences occurring in fiscal years beginning on 27 or after October 1, 1991, a minimum of 20% of the difference 05975'01 41 1 between the estimated and the actual aggregate compensation and 2 the estimated and the actual contribution rate described in 3 subsection (4), if any, may be submitted in the executive budget 4 to the legislature for appropriation in the next succeeding state 5 fiscal year and a minimum of 25% of the remaining difference 6 shall be submitted in the executive budget to the legislature for 7 appropriation in each of the following 4 state fiscal years, or 8 until 100% of the remaining difference is submitted, whichever 9 first occurs. In addition, interest shall be included for each 10 year that a portion of the remaining difference is carried 11 forward. The interest rate shall equal the actuarially assumed 12 rate of investment return for the state fiscal year in which pay- 13 ment is made. THIS SUBSECTION DOES NOT APPLY FOR THOSE FISCAL 14 YEARS IN WHICH A DEPOSIT OCCURS PURSUANT TO SUBSECTION (6). 15 (6) FOR EACH FISCAL YEAR THAT BEGINS ON OR AFTER OCTOBER 1, 16 2001, IF THE ACTUARIAL VALUATION PREPARED PURSUANT TO THIS SEC- 17 TION FOR EACH FISCAL YEAR DEMONSTRATES THAT AS OF THE BEGINNING 18 OF A FISCAL YEAR, AND AFTER ALL CREDITS AND TRANSFERS REQUIRED BY 19 THIS ACT FOR THE PREVIOUS FISCAL YEAR HAVE BEEN MADE, THE SUM OF 20 THE ACTUARIAL VALUE OF ASSETS AND THE ACTUARIAL PRESENT VALUE OF 21 FUTURE NORMAL COST CONTRIBUTIONS EXCEEDS THE ACTUARIAL PRESENT 22 VALUE OF BENEFITS, THE ANNUAL LEVEL PERCENT OF PAYROLL CONTRIBU- 23 TION RATE AS DETERMINED PURSUANT TO SUBSECTIONS (1), (2), AND (3) 24 MAY BE DEPOSITED INTO THE HEALTH ADVANCE FUNDING SUBACCOUNT CRE- 25 ATED UNDER SECTION 11(9). 05975'01 42 1 Sec. 46. (1) A supplemental member may retire with a 2 supplemental early retirement allowance provided in section 47 3 upon satisfaction of each of the following conditions: 4 (a) He OR SHE is age 51 years or older but less than age 62 5 years. 6 (b) He OR SHE has 25 or more years of covered service. 7 (c) His OR HER last 3 years of credited service are covered 8 service. 9 (d) He OR SHE files a written request for retirement with 10 the retirement board stating the date that he OR SHE wishes to be 11 retired., which shall not be less than 30 days or more than 9012days after the date his application is filed.13 (2) A supplemental member may be separated from employment 14 in a covered position the first day of the calendar month follow- 15 ing the month in which he OR SHE attains age 56 years. A supple- 16 mental membersoseparated UNDER THIS SUBSECTION may retire 17 with a supplemental early retirement allowance provided in sec- 18 tion 47 if he OR SHE satisfies each of the following conditions: 19 (a) He OR SHE has not attained age 62 years. 20 (b) He OR SHE has 10 or more years of covered service. 21 (c) His OR HER last 3 years of credited service are covered 22 service. 23 (d) He OR SHE files a written request for retirement with 24 the retirement board stating the date that he OR SHE wishes to be 25 retired., which shall not be less than 30 days or more than 9026days after the date his application is filed.05975'01 43 1 (3) The state personnel director shall determine all 2 questions on eligibility for supplemental early retirement 3 benefits within the meaning of sections 45 to 47. 4 Sec. 48. (1) A member who is a conservation officer may 5 retire under this section if all of the following requirements 6 are met: 7 (a) The member is a conservation officer on April 1, 1991. 8 (b) The member has 25 or more years of credited service, of 9 which 20 years of credited service are as a conservation officer 10 and of which the last 2 years of credited service are as a con- 11 servation officer. 12 (2) A member who is a conservation officer may retire under 13 this section if the member has 25 or more years of credited serv- 14 ice, of which 23 years of credited service are as a conservation 15 officer and of which the last 2 years of credited service are as 16 a conservation officer. 17 (3) A member may retire under subsection (1) or (2) upon 18 written application to the retirement board stating a date upon 19 which he or she desires to retire.that is not less than 30 or20more than 90 days after the execution and filing of the21application.Beginning on the retirement allowance effective 22 date, he or she shall receive a retirement allowance equal to 60% 23 of the member's annual compensation for the member's most highly 24 compensated 24 consecutive months of service as a conservation 25 officer. The formula for calculating a member's retirement 26 allowance under this subsection shall never exceed the formula 27 for calculating a retirement allowance under section 24 of the 05975'01 44 1 state police retirement act of 1986,Act No. 182 of the Public2Acts of 1986, being section 38.1624 of the Michigan Compiled3Laws1986 PA 182, MCL 38.1624. 4 (4) A member who is a conservation officer may retire under 5 this section if all of the following requirements are met: 6 (a) The member is a conservation officer on April 1, 1991. 7 (b) The member is 50 years of age or older. 8 (c) The member has 10 years of credited service as a conser- 9 vation officer and the last 2 years of credited service are as a 10 conservation officer. 11 (5) A member may retire under subsection (4) upon written 12 application to the retirement board, on or after April 1, 1991, 13 but not later than April 1, 1992, stating a date on which he or 14 she desires to retire. The retirement allowance effective date 15 shall be on or after May 1, 1991 but not later than July 1, 16 1992. Beginning on the retirement allowance effective date, he 17 or she shall receive a retirement allowance equal to 2% of the 18 member's annual compensation for the member's most highly compen- 19 sated 24 consecutive months of service as a conservation officer 20 times the number of years, including any fraction of a year, of 21 service credited to the member under this act. However, a 22 retirement allowance payable under this subsection shall not 23 exceed 60% of the member's annual compensation for the member's 24 most highly compensated 24 consecutive months of service as a 25 conservation officer. 26 (6) Before the effective date of the retirement allowance, a 27 member who is a conservation officer and who retires under this 05975'01 45 1 section shall elect to receive his or her retirement allowance 2 under a form of payment as provided in section 31(1). 3 (7) Pursuant to rules promulgated by the retirement board, a 4 member who retires under this section before becoming 65 years 5 old may elect to have his or her regular retirement allowance 6 equated on an actuarial basis to provide an increased retirement 7 allowance payable to age 65 and a reduced retirement allowance 8 payable after becoming 65 years old. The retirant's increased 9 retirement allowance payable to age 65 shall approximately equal 10 the sum of his or her reduced retirement allowance payable after 11 age 65 and his or her estimated social security primary insurance 12 amount. 13 (8) If a member who retires under this section dies before 14 receiving payment of his or her retirement allowance in an aggre- 15 gate amount equal to the accumulated contributions standing to 16 the retirant's account in the employees' savings fund at the time 17 of his or her retirement, the difference between his or her accu- 18 mulated contributions and the amount of the retirement allowance 19 received by him or her shall be paid to the person or persons 20 that the retirant has nominated by written designation duly exe- 21 cuted and filed with the retirement board, or, if there is no 22 such designated person or persons surviving, then to the 23 retirant's legal representative or estate. 24 (9) The director of the department of natural resources, or 25 his or her designee, shall certify to the retirement board that a 26 member who applies to retire under this section is a conservation 27 officer. 05975'01 46 1 (10) This section does not prohibit a member who is a 2 conservation officer and who does not meet the requirements of 3 this section from qualifying for a retirement allowance under any 4 other provision of this act. 5 Sec. 49. (1) This section is enacted pursuant to 6 section 401(a) of the internal revenue code that imposes certain 7 administrative requirements and benefit limitations for qualified 8 governmental plans. This state intends that the retirement 9 system be a qualified pension plan created in trust under section 10 401 of the internal revenue code and that the trust be an exempt 11 organization under section 501 of the internal revenue code. The 12 department shall administer the retirement system to fulfill this 13 intent. 14 (2) Except as otherwise provided in this section, 15 employer-financed benefits provided by the retirement system 16 under this act shall not exceed the lesser of $90,000.00 or 100% 17 of the member's average compensation for high 3 years as 18 described in section 415(b)(3) of the internal revenue code for 19 retirement occurring at age 62 or older. 20 (3) The limitation on employer financed benefits provided by 21 the retirement system under subsection (2) applies unless appli- 22 cation of subsections (4) and (5) produces a higher limitation, 23 in which case the higher limitation applies. 24 (4) If a member retires before age 62, the amount of 25 $90,000.00 in subsection (2) is actuarially reduced to reflect 26 payment before age 62. The retirement system shall use an 27 interest rate of 5% per year compounded annually to calculate the 05975'01 47 1 actuarial reduction in this subsection. If this subsection 2 produces a limitation of less than $75,000.00 at age 55, the lim- 3 itation at age 55 is $75,000.00 and the limitations for ages 4 under age 55 shall be calculated from a limitation of $75,000.00 5 at age 55. 6 (5) Section 415(d) of the internal revenue code requires the 7 commissioner of internal revenue to adjust the $90,000.00 limita- 8 tion in subsection (2) to reflect cost of living increases, 9 beginning with calendar year 1988. This subsection shall be 10 administered using the limitations applicable to each calendar 11 year as adjusted by the commissioner of internal revenue under 12 section 415(d) of the internal revenue code. The retirement 13 system shall adjust the benefits subject to the limitation each 14 year to conform with the adjusted limitation. 15 (6) The assets of the retirement system shall be held in 16 trust and invested for the sole purpose of meeting the legitimate 17 obligations of the retirement system and shall not be used for 18 any other purpose. The assets shall not be used for or diverted 19 to a purpose other than for the exclusive benefit of the members, 20 vested former members, retirants, and retirement allowance bene- 21 ficiaries before satisfaction of all retirement system 22 liabilities. 23 (7) The retirement system shall return post-tax member con- 24 tributions made by a member and received by the retirement system 25 to a member upon retirement, pursuant to internal revenue service 26 regulations and approved internal revenue service exclusion ratio 27 tables. 05975'01 48 1 (8) The required beginning date for retirement allowances 2 and other distributions shall not be later than April 1 of the 3 calendar year following the calendar year in which the employee 4 attains age 70-1/2 or April 1 of the calendar year following the 5 calendar year in which the employee retires. 6 (9) If the retirement system is terminated, the interest of 7 the members, vested former members, retirants, and retirement 8 allowance beneficiaries in the retirement system is nonforfeit- 9 able to the extent funded as described in section 411(d)(3) of 10 the internal revenue code and related internal revenue service 11 regulations applicable to governmental plans. 12 (10) Notwithstanding any other provision of this act to the 13 contrary that would limit a distributee's election under this 14 act, a distributee may elect, at the time and in the manner pre- 15 scribed by the retirement board, to have any portion of an eligi- 16 ble rollover distribution paid directly to an eligible retirement 17 plan specified by the distributee in a direct rollover. This 18 subsection applies to distributions made on or after January 1, 19 1993. 20 (11) For purposes of determining actuarial equivalent 21 retirement allowances under sections 31(1)(a) and (b) and 20(2), 22 the actuarially assumed interest rate shall be 8% with utiliza- 23 tion of the 1983 group annuity and mortality table. 24 (12) Notwithstanding any other provision of this section, 25 the retirement system shall be administered in compliance with 26 the provisions of section 415 of the internal revenue code and 27 revenue service regulations under that section that are 05975'01 49 1 applicable to governmental plans. If there is a conflict between 2 this section and another section of this or any other act of this 3 state, this section prevails. 4 (13) NOTWITHSTANDING ANY OTHER PROVISION OF THIS ACT, THE 5 COMPENSATION OF A MEMBER OF THE RETIREMENT SYSTEM SHALL BE TAKEN 6 INTO ACCOUNT FOR ANY YEAR UNDER THE RETIREMENT SYSTEM ONLY TO THE 7 EXTENT THAT IT DOES NOT EXCEED THE COMPENSATION LIMIT ESTABLISHED 8 IN SECTION 401(A)(17) OF THE INTERNAL REVENUE CODE, AS ADJUSTED 9 BY THE COMMISSIONER OF INTERNAL REVENUE. THIS SUBSECTION APPLIES 10 TO ANY PERSON WHO FIRST BECOMES A MEMBER OF THE RETIREMENT SYSTEM 11 ON OR AFTER OCTOBER 1, 1996. 12 (14) NOTWITHSTANDING ANY OTHER PROVISION OF THIS ACT, CON- 13 TRIBUTIONS, BENEFITS, AND SERVICE CREDIT WITH RESPECT TO QUALI- 14 FIED MILITARY SERVICE WILL BE PROVIDED UNDER THE RETIREMENT 15 SYSTEM IN ACCORDANCE WITH SECTION 414(U) OF THE INTERNAL REVENUE 16 CODE. THIS SUBSECTION APPLIES TO ALL QUALIFIED MILITARY SERVICE 17 ON OR AFTER DECEMBER 12, 1994. 18 Sec. 52. After consulting the retirement system's actuary, 19 the department of management and budget shall calculate for each 20 fiscal year any cost savings that have accrued to this state as a 21 result of the implementation ofthe amendatory act that added22this section1996 PA 487 over the costs that would have been 23 incurred by this state to fund this retirement system hadthe24amendatory act that added this section1996 PA 487 not been 25 implemented.The total amount of such cost savings shall be26submitted in the executive budget to the legislature for27appropriation in the next succeeding state fiscal year to the05975'01 50 1health insurance reserve fund created by section 11(8). Any2amount appropriated pursuant to this section and accumulated3earnings on those amounts shall not be expended until the actuar-4ial accrued liability for health benefits under section 20d is5100% funded.FOR EACH FISCAL YEAR IN WHICH A DEPOSIT UNDER SEC- 6 TION 38(6) DOES NOT OCCUR, THE DEPARTMENT MAY DEPOSIT ALL OR PART 7 OF THE COST SAVINGS CALCULATED PURSUANT TO THIS SECTION INTO THE 8 HEALTH ADVANCE FUNDING SUBACCOUNT CREATED UNDER SECTION 11(9) BY 9 REDUCING THE NORMAL COST AND UNFUNDED ACTUARIAL ACCRUED LIABILITY 10 CONTRIBUTION RATES AS CALCULATED PURSUANT TO SECTION 38, AND 11 INCREASING THE CONTRIBUTION RATE FOR BENEFITS PROVIDED UNDER 12 SECTION 20D BY THE SAME AMOUNT. HOWEVER, THE NORMAL COST AND 13 UNFUNDED ACCRUED ACTUARIAL LIABILITY RATES SHALL NOT BE REDUCED 14 TO AN AMOUNT LESS THAN ZERO. 15 Enacting section 1. The designation, by this amendatory 16 act, that any payments made under section 19g(3) are taxable 17 under the income tax act of 1967, 1967 PA 281, MCL 206.1 to 18 206.32, is intended to clarify the legislative intent and correct 19 misinterpretations surrounding the fact that payments under 20 section 19g(3) are not made by the retirement system and are not 21 retirement payments exempt from income tax. 05975'01 Final page. MRM