November 4, 2004, Introduced by Reps. Ehardt, Koetje, Julian and Bisbee and referred to the Committee on Government Operations.
A bill to amend 1957 PA 261, entitled
"Michigan legislative retirement system act,"
by amending sections 26, 28, 30, 59a, and 79 (MCL 38.1026,
38.1028, 38.1030, 38.1059a, and 38.1079), sections 26, 30, and
59a as amended by 2002 PA 97, section 28 as amended by 1981 PA
123, and section 79 as amended by 1998 PA 501.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 Sec. 26. (1)
Beginning January 1, 1999, the The
2 retirement system shall be administered by a board of trustees.
3 A member of the board of trustees serving as of December 31, 2004
4 shall continue to serve as a member until December 31, 2005.
5 Beginning January 1, 2006, the board of trustees shall be
6 composed as indicated in the bylaws. , consisting of 11 persons
7 as follows:
8 (a) Two members of
the house of representatives appointed by
1 the speaker of the
house of representatives.
2 (b) Two members of
the senate, appointed in the same manner
3 as members of standing
committees of the senate are appointed.
4 (c) Two retirants
appointed by the speaker of the house of
5 representatives and 2
retirants appointed by the senate majority
6 leader.
7 (d) One deferred
vested member appointed by the speaker of
8 the house of
representatives and 1 deferred vested member
9 appointed by the
senate majority leader. If a deferred vested
10 member serving on the
board becomes a retirant during his or her
11 term of office, he or
she shall be entitled to serve the
12 remainder of his or
her term of office.
13 (e) One
participant of Tier 2 who was a former member of Tier
14 1 appointed in 1999 by
the senate majority leader and beginning
15 in 2001 appointed
alternately by the speaker of the house of
16 representatives and
the senate majority leader. However, if
17 there is no
participant of Tier 2 who meets the former member
18 requirement of this
subdivision, then 1 additional deferred
19 vested member
appointed in the manner prescribed in this
20 subdivision.
21 (2) Only members
of the retirement system are eligible to
22 serve as members on
the board of trustees except for the
23 retirants and Tier 2
participant authorized under subsection
24 (1). Board members
appointed under subsection (1)(a) and (b) are
25 appointed for 2-year
terms. Board members appointed under
26 subsection (1)(c) are
appointed for 4-year terms. Board members
27 appointed for terms
beginning in 1999 under subsection (1)(d) are
1 appointed for 2-year
terms. Board members appointed for terms
2 beginning in 2001
under subsection (1)(d) are appointed for
3 4-year terms. A board
member appointed for a term beginning in
4 1999 under subsection
(1)(e) is appointed for a 2-year term.
5 Beginning in 2001, a
board member appointed under subsection
6 (1)(e) is appointed
for a 4-year term. For terms beginning on or
7 after January 1, 1999,
board members appointed under subsection
8 (1)(c), (d), or (e)
shall not serve as a board member under those
9 subdivisions for a
combined total of more than 8 years.
10 (3) Each person,
whether appointed as a trustee or becoming a
11 trustee ex officio,
shall take an oath of office before the
12 secretary of state,
clerk of the house, or secretary of the
13 senate, and, upon
taking the oath, qualifies as a trustee. The
14 oath of office shall
be as prescribed under section 1 of article
15 XI of the state
constitution of 1963.
16 Sec. 28. A Beginning
January 1, 2005, a vacancy in a
17 trusteeship shall be
filled for the unexpired term in the same
18 manner as original
appointments are made as provided
in the
19 bylaws.
20 Sec. 30. Each trustee is entitled to 1 vote on any action
21 of the board and at
least 6 concurring votes of a majority of
22 board members are necessary for any action by the board at a
23 meeting. A decision or action shall not become effective, unless
24 presented and so approved by the action of the board. A trustee
25 shall not vote by proxy, but shall be present at the meeting in
26 order to have his or her vote recorded.
27 Sec. 59a. (1) This section is enacted pursuant to section
1 401(a) of the internal revenue code, 26 USC 401(a), that imposes
2 certain administrative requirements and benefit limitations for
3 qualified governmental plans. This state intends that the
4 retirement system be a qualified pension plan created in trust
5 under section 401 of the internal revenue code, 26 USC 401, and
6 that the trust be an exempt organization under section 501 of the
7 internal revenue code, 26 USC 501. The board of trustees shall
8 administer the retirement system to fulfill this intent.
9 (2) Except as
otherwise provided in this section,
10 employer-financed
benefits provided by the retirement system
11 under this act shall
not exceed the lesser of $90,000.00 or 100%
12 of the member's
average compensation for high 3 years as
13 described in section
415(b)(3) of the internal revenue code for
14 retirement occurring
at age 62 or older.
15 (3) The
limitation on employer financed benefits provided by
16 the retirement system
under subsection (2) applies unless
17 application of
subsections (4) and (5) produces a higher
18 limitation, in which
case the higher limitation applies.
19 (4) If a member
retires before age 62, the amount of
20 $90,000.00 in
subsection (2) is actuarially reduced to reflect
21 payment before age
62. The retirement system shall use an
22 interest rate of 5%
per year compounded annually to calculate the
23 actuarial reduction in
this subsection. If this subsection
24 produces a limitation
of less than $75,000.00 at age 55, the
25 limitation at age 55
is $75,000.00 and the limitations for ages
26 under age 55 shall be
calculated from a limitation of $75,000.00
27 at age 55.
1 (5) Section 415(d)
of the internal revenue code requires the
2 commissioner of
internal revenue to adjust the $90,000.00
3 limitation in
subsection (2) to reflect cost of living increases,
4 beginning with calendar
year 1988. This subsection shall be
5 administered using the
limitations applicable to each calendar
6 year as adjusted by
the commissioner of internal revenue under
7 section 415(d) of the
internal revenue code. The retirement
8 system shall adjust
the benefits subject to the limitation each
9 year to conform with
the adjusted limitation.
10 (2) Notwithstanding any other provision of this act, the
11 retirement system shall be administered in compliance with
12 section 415 of the internal revenue code, 26 USC 415, and
13 regulations under that section that are applicable to
14 governmental plans. Employer-financed benefits provided by the
15 retirement system under this act shall not exceed the applicable
16 limitations of section 415 of the internal revenue code, 26 USC
17 415, as adjusted by the commissioner of internal revenue under
18 section 415(d) of the internal revenue code, 26 USC 415(d), to
19 reflect cost of living increases, and the retirement system shall
20 adjust the benefits subject to the limitation each calendar year
21 to conform with the adjusted limitation. For purposes of section
22 415(b) of the internal revenue code, 26 USC 415(b), the
23 applicable limitation shall apply to aggregated benefits received
24 from all qualified pension plans for which the office of
25 retirement services coordinates administration of that
26 limitation.
27 (3) (6) The
assets of the retirement system shall be held
1 in trust and invested for the sole purpose of meeting the
2 legitimate obligations of the retirement system and shall not be
3 used for any other purpose. The assets shall not be used for or
4 diverted to a purpose other than for the exclusive benefit of the
5 members, vested former members, retirants, and retirement
6 allowance beneficiaries before satisfaction of all retirement
7 system liabilities.
8 (4) (7) The
retirement system shall return post-tax member
9 contributions made by a member and received by the retirement
10 system to a member upon retirement, pursuant to internal revenue
11 service regulations and approved internal revenue service
12 exclusion ratio tables.
13 (5) (8) The
required beginning date for retirement
14 allowances and other distributions shall not be later than
15 April 1 of the calendar year following the calendar year in which
16 the employee attains age 70-1/2 or April 1 of the calendar year
17 following the calendar year in which the employee retires.
18 (6) (9) If
the retirement system is terminated, the
19 interest of the members, deferred vested members, retirants, and
20 retirement allowance beneficiaries in the retirement system is
21 nonforfeitable to the extent funded as described in section
22 411(d)(3) of the internal revenue code, 26 USC 411(d)(3), and
23 related internal revenue service regulations applicable to
24 governmental plans.
25 (7) (10) Notwithstanding
any other provision of this act to
26 the contrary that would limit a distributee's election under this
27 act, a distributee may elect, at the time and in the manner
1 prescribed by the board of trustees, to have any portion of an
2 eligible rollover distribution paid directly to an eligible
3 retirement plan specified by the distributee in a direct
4 rollover. This subsection applies to distributions made on or
5 after January 1, 1993.
6 (8) (11) For
purposes of determining actuarial equivalent
7 retirement allowances under this act, the actuarially assumed
8 interest rate shall be 7% with utilization of the 1971 group
9 annuity and mortality table.
10 (12)
Notwithstanding any other provision of this section,
11 the retirement system
shall be administered in compliance with
12 the provisions of
section 415 of the internal revenue code and
13 revenue service
regulations under this section that are
14 applicable to
governmental plans. If there is a conflict between
15 this section and
another section of this or any other act of this
16 state, this section
prevails.
17 (9) (13) Notwithstanding
any other provision of this act,
18 the compensation of a member of the retirement system shall be
19 taken into account for any year under the retirement system only
20 to the extent that it does not exceed the compensation limit
21 established in section 401(a)(17) of the internal revenue code,
22 26 USC 401(a)(17), as adjusted by the commissioner of internal
23 revenue. This subsection applies to any person who first becomes
24 a member of the retirement system on or after October 1, 1996.
25 (10) (14) Notwithstanding
any other provision of this act,
26 contributions, benefits, and service credit with respect to
27 qualified military service will be provided under the retirement
1 system in accordance with section 414(u) of the internal revenue
2 code. This subsection applies to all qualified military service
3 on or after December 12, 1994.
4 Sec. 79. (1) A former qualified participant may elect
5 health insurance benefits in the manner prescribed in this
6 section if he or she meets both of the following requirements:
7 (a) The former qualified participant is vested in health
8 benefits under section 75(2).
9 (b) The former qualified participant meets 1 of the following
10 requirements:
11 (i) He or she meets or exceeds the benefit commencement age
12 employed in the actuarial present value calculation under section
13 62 and the service requirements that would have applied to that
14 former participant under Tier 1 for receiving health insurance
15 coverage under section 50b, if that former participant was a
16 member of Tier 1.
17 (ii) He or she is 55 years of age or older.
18 (2) A former qualified participant who is eligible to elect
19 health insurance coverage under subsection (1) may elect health
20 insurance coverage in a health benefit plan or plans as
21 authorized by section 50b.
, or in another plan as provided in
22 subsection (6). A former qualified participant who is eligible
23 to elect health insurance coverage under subsection (1) may also
24 elect health insurance coverage for his or her health benefit
25 dependents, if any. A surviving health benefit dependent of a
26 deceased former qualified participant who is eligible to elect
27 health insurance coverage under subsection (1) may elect health
1 insurance coverage to begin at the death of the deceased former
2 qualified participant in the manner prescribed in this section.
3 (3) Except as otherwise provided in subsection (6), an
4 individual who elects health insurance coverage under this
5 section shall become a member of a health insurance coverage
6 group authorized pursuant to section 50b.
7 (4) For a former qualified participant who is eligible to
8 elect health insurance coverage under subsection (1) and who is
9 vested in those benefits under section 75(2)(a) or (c), and for
10 his or her health benefit dependents, this state shall pay a
11 portion of the health insurance premium as calculated under this
12 subsection on a cash disbursement method. An individual
13 described in this subsection who elects health insurance coverage
14 under this section shall pay to the retirement system the
15 remaining portion of the health insurance coverage premium not
16 paid by this state under this subsection. The portion of the
17 health insurance coverage premium paid by this state under this
18 subsection shall be 90% of the payments for health insurance
19 coverage under section 50b. If the individual elects the health
20 insurance coverage provided under section 50b, this state shall
21 transfer its portion of the amount calculated under this
22 subsection to the health insurance fund created by section 22c.
23 (5) For a former qualified participant who is eligible to
24 elect health insurance coverage under subsection (1) and who is
25 vested in those benefits under section 75(2)(b), and for his or
26 her health benefit dependents, this state shall pay a portion of
27 the health insurance premium as calculated under this subsection
1 on a cash disbursement method. An individual described in this
2 subsection who elects health insurance coverage under this
3 section shall pay to the retirement system the remaining portion
4 of the health insurance coverage premium not paid by this state
5 under this subsection. The portion of the health insurance
6 coverage premium paid by this state under this subsection shall
7 be equal to the premium amounts paid on behalf of retirants of
8 Tier 1 for health insurance coverage under section 50b. If the
9 individual elects the health insurance coverage provided under
10 section 50b, the state shall transfer its portion of the amount
11 calculated under this subsection to the health insurance fund
12 created by section 22c.
13 (6) A former
qualified participant or health benefit
14 dependent who is
eligible to elect health insurance coverage
15 under this section and
who elects health insurance coverage under
16 a different plan than
the plan authorized under section 50b may
17 elect to have an
amount up to the amount of the retirement
18 system's share of the
monthly health insurance premium subsidy
19 provided in this
section paid by the retirement system directly
20 to the other health
insurance plan or to a medical savings
21 account established
pursuant to section 220 of the internal
22 revenue code, to the
extent allowed by law or under the
23 provisions and
procedures of Tier 2.
24 (6) (7) If
the department of management and budget receives
25 notification from the United States internal revenue service that
26 this section or any portion of this section will cause the
27 retirement system to be disqualified for tax purposes under the
1 internal revenue code, then the portion that will cause the
2 disqualification does not apply.