SENATE BILL No. 1128

February 21, 2002, Introduced by Senators SCHWARZ and GOUGEON and referred to the

Committee on Appropriations.

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:

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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 the

6 extent that the remuneration does not exceed the compensation

7 limit established in section 401(a)(17) of the internal revenue

8 code. 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

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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,

14 and fish) of the natural resources and environmental protection

15 act, Act No. 451 of the Public Acts of 1994, being

16 section 324.1606 1994 PA 451, MCL 324.1606, and section 1 of

17 Act No. 109 of the Public Acts of 1986, being section 300.21 of

18 the Michigan Compiled Laws 1986 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) Except BEGINNING 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, or a qualified trust described in section 401(a)

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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) "Eligible BEGINNING 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) The EXCEPT 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

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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 with Act No. 267 of the Public Acts of 1976,

25 being sections 15.261 to 15.275 of the Michigan Compiled Laws

26 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

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1 in the manner required by Act No. 267 of the Public Acts of

2 1976 THE 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 as

9 fixed by the board THE 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

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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

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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

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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. All EXCEPT 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

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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

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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

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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

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1 school employees retirement act of 1979, Act No. 300 of the

2 Public Acts of 1980, being sections 38.1301 to 38.1408 of the

3 Michigan Compiled Laws 1980 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-

7 tions 38.2101 to 38.2608 of the Michigan Compiled Laws 1992

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 sections

12 38.1601 to 38.1648 of the Michigan Compiled Laws 1986 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) An EXCEPT 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

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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 Acts

23 of 1983, being sections 409.221 to 409.229 of the Michigan

24 Compiled Laws 1983 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.

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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

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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 less

13 than 30 or more than 90 days after the execution and filing of

14 the 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 the

22 execution 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

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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

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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:

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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.

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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 less

05975'01

21

1 than 30 or more than 180 days after the facility actually

2 closes, 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 section 5 of the Michigan liquor control act,

11 1933 (Ex Sess) PA 8, MCL 436.5 209 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 section 10 221 of the Michigan liquor control

3 act, 1933 (Ex Sess) PA 8, MCL 436.10 CODE 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 designation duly executed 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 30

4 days or more than 90 days after the execution and filing of the

5 application, 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 Public

14 Acts of 1969, being section 418.701a of the Michigan Compiled

15 Laws 1969 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, being

9 sections 32.706 and 32.810 of the Michigan Compiled Laws 1967

10 PA 150, MCL 32.706 AND 32.810.

11 Sec. 21. Subject to the provisions of sections 33 and 34,

12 upon the application of a member, or his department head, or the

13 state personnel director, a member who becomes totally incapaci-

14 tated for duty in the service of the state of Michigan without

15 willful negligence on his part, by reason of a personal injury or

16 disease, which the retirement board finds to have occurred as the

17 natural and proximate result of the said member's actual per-

18 formance of duty in the service of the state, shall be retired:

19 Provided, The medical advisor after a medical examination of said

20 member shall certify in writing that said member is mentally or

21 physically totally incapacitated for the further performance of

22 duty in the service of the state, and that such incapacity will

23 probably be permanent, and that said member should be retired:

24 And provided further, That the retirement board concurs in the

25 recommendation 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,

23 upon application of a member, or his department head, or the

24 state personnel director, a member who has been a state employee

25 at least 10 years becomes totally and permanently incapacitated

26 for duty as the result of causes occurring not in the performance

27 of duty to the state, may be retired by the retirement board:

05975'01

36

1 Provided, The medical advisor after a medical examination of such

2 member, shall certify that such member is mentally or physically

3 incapacitated for the further performance of duty, and such inca-

4 pacity is likely to be permanent and that such member should be

5 retired.

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.

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1 Sec. 33. (a) Once each year during the first 5 years

2 following the retirement of a member on a disability retirement

3 allowance, and at least once in every 3 year period thereafter

4 the THE 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. ;

7 such THE examination IS to be made by or under the direction of

8 the medical advisor at the RETIRANT'S place of residence of said

9 retirant, or other place mutually agreed upon. Should any dis-

10 ability retirant , who has not attained age 60 years , refuse

11 to submit to such THE medical examination, in any such

12 period, his OR HER disability retirement allowance may be dis-

13 continued until his OR HER withdrawal of such THE refusal. ,

14 and should such IF THE refusal continue CONTINUES for 1 year,

15 all his rights in and to his OR HER disability retirement

16 allowance may be revoked by the retirement board. If upon such

17 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 to

21 active service with the state and his OR HER disability retire-

22 ment allowance shall cease AFTER 6 MONTHS.

23 (b) Should IF the secretary report REPORTS and certify

24 CERTIFIES to the retirement board that such A 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, and should IF the retirement

05975'01

38

1 board concur CONCURS in such THE 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 of such THE

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.

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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

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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 90

12 days 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 member so separated 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 90

26 days 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 or

20 more than 90 days after the execution and filing of the

21 application. 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 Public

2 Acts of 1986, being section 38.1624 of the Michigan Compiled

3 Laws 1986 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.

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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

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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 of the amendatory act that added

22 this section 1996 PA 487 over the costs that would have been

23 incurred by this state to fund this retirement system had the

24 amendatory act that added this section 1996 PA 487 not been

25 implemented. The total amount of such cost savings shall be

26 submitted in the executive budget to the legislature for

27 appropriation in the next succeeding state fiscal year to the

05975'01

50

1 health insurance reserve fund created by section 11(8). Any

2 amount appropriated pursuant to this section and accumulated

3 earnings on those amounts shall not be expended until the actuar-

4 ial accrued liability for health benefits under section 20d is

5 100% 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