SB-1639, As Passed Senate, December 2, 2008
November 12, 2008, Introduced by Senators SWITALSKI and JANSEN and referred to the Committee on Appropriations.
A bill to amend 1943 PA 240, entitled
"State employees' retirement act,"
by amending sections 1d and 49 (MCL 38.1d and 38.49), section 1d as
amended by 2002 PA 93 and section 49 as amended by 2004 PA 33.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1d. (1) Beginning January 1, 2002, except as otherwise
provided
in this subsection, "eligible retirement plan" means an 1
or more of the following:
(a) An individual retirement account described in section
408(a)
of the internal revenue code, an 26 USC 408.
(b) An individual retirement annuity described in section
408(b)
of the internal revenue code, an 26 USC 408.
(c) An annuity plan described in section 403(a) of the
internal
revenue code, a 26 USC
403.
(d) A qualified trust described in section 401(a) of the
internal
revenue code, an 26 USC
401.
(e) An annuity contract described in section 403(b) of the
internal
revenue code, or an 26 USC
403.
(f) An eligible plan under section 457(b) of the internal
revenue code, 26 USC 457, that is maintained by a state, a
political subdivision of a state, an agency or instrumentality of a
state, or an agency or instrumentality of a political subdivision
of a state, so long as amounts transferred into eligible retirement
plans from this retirement system are separately accounted for by
the plan provider that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to a surviving spouse on or before December 31, 2001,
an eligible retirement plan means an individual retirement account
or an individual retirement annuity described above.
(g) Beginning January 1, 2008, except as otherwise provided in
this subsection, "eligible retirement plan" means a Roth individual
retirement account as described in section 408A of the internal
revenue code, 26 USC 408A, subject to the rules that apply to
rollovers from a traditional individual retirement account to a
Roth individual retirement account.
(2)
Beginning January 1, 2002 2007, "eligible rollover
distribution" means a distribution of all or any portion of the
balance to the credit of the distributee. Eligible rollover
distribution does not include any of the following:
(a) A distribution made for the life or life expectancy of the
distributee or the joint lives or joint life expectancies of the
distributee and the distributee's designated beneficiary.
(b) A distribution for a specified period of 10 years or more.
(c) A distribution to the extent that the distribution is
required under section 401(a)(9) of the internal revenue code.
(d)
Except as otherwise provided in this subdivision, the
portion
of any distribution that is not includable in federal gross
income,
determined without regard to the exclusion for net
unrealized
appreciation with respect to employer securities. If a
portion
of a distribution that is not included in federal gross
income
is paid to an individual retirement account or annuity
described
in section 408(a) or 408(b) of the internal revenue code
or
a qualified defined contribution plan described in section
401(a)
or 403(a) of the internal revenue code and the plan
providers
agree to separately account for amounts paid, including
any
portion of the distribution that is includable in gross income,
then
the portion of the distribution that is not includable in
federal
gross income is an eligible rollover distribution.
(d) The portion of any distribution that is not includable in
federal gross income, except to the extent such portion of the
distribution is paid to either of the following:
(i) An individual retirement account or annuity described in
section 408(a) or 408(b) of the internal revenue code, 26 USC 408.
(ii) A qualified plan described in section 401(a) of the
internal revenue code, 26 USC 401, or an annuity contract described
in section 403(b) of the internal revenue code, 26 USC 403, and the
plan providers agree to separately account for the amounts paid,
including any portion of the distribution that is includable in
federal gross income, and the portion of the distribution which is
not so includable.
(3) "Employee" means a person who may become eligible for
membership under this act, as provided in section 13, if the
person's compensation is paid in whole or in part by this state.
(4) "Employer" or "state" means this state.
Sec. 49. (1) This section is enacted pursuant to section
401(a) of the internal revenue code, 26 USC 401, that imposes
certain administrative requirements and benefit limitations for
qualified governmental plans. This state intends that the
retirement system be a qualified pension plan created in trust
under section 401 of the internal revenue code, 26 USC 401, and
that the trust be an exempt organization under section 501 of the
internal revenue code, 26 USC 501. The department shall administer
the retirement system to fulfill this intent.
(2) The retirement system shall be administered in compliance
with the provisions of section 415 of the internal revenue code, 26
USC 415, and regulations under that section that are applicable to
governmental plans and beginning January 1, 2010, applicable
provisions of the final regulations issued by the internal revenue
service on April 5, 2007. Employer-financed benefits provided by
the retirement system under this act shall not exceed the
applicable limitations set forth in section 415 of the internal
revenue code, 26 USC 415, as adjusted by the commissioner of
internal revenue under section 415(d) of the internal revenue code,
26 USC 415, to reflect cost-of-living increases, and the retirement
system shall adjust the benefits, including benefits payable to
retirants and retirement allowance beneficiaries, subject to the
limitation each calendar year to conform with the adjusted
limitation. For purposes of section 415(b) of the internal revenue
code, 26 USC 415, the applicable limitation shall apply to
aggregated benefits received from all qualified pension plans for
which the office of retirement services coordinates administration
of that limitation. If there is a conflict between this section and
another section of this act, this section prevails.
(3) The assets of the retirement system shall be held in trust
and invested for the sole purpose of meeting the legitimate
obligations of the retirement system and shall not be used for any
other purpose. The assets shall not be used for or diverted to a
purpose other than for the exclusive benefit of the members, vested
former members, retirants, and retirement allowance beneficiaries
before satisfaction of all retirement system liabilities.
(4) The retirement system shall return post-tax member
contributions made by a member and received by the retirement
system to a member upon retirement, pursuant to internal revenue
service regulations and approved internal revenue service exclusion
ratio tables.
(5) The required beginning date for retirement allowances and
other distributions shall not be later than April 1 of the calendar
year following the calendar year in which the employee attains age
70-1/2 or April 1 of the calendar year following the calendar year
in which the employee retires. The required minimum distribution
requirements imposed by section 401(a)(9) of the internal revenue
code, 26 USC 401, shall apply to this act and be administered in
accordance with a reasonable and good faith interpretation of the
required minimum distribution requirements for all years to which
the required minimum distribution requirements apply to the
retirement system.
(6) If the retirement system is terminated, the interest of
the members, vested former members, retirants, and retirement
allowance beneficiaries in the retirement system is nonforfeitable
to the extent funded as described in section 411(d)(3) of the
internal revenue code, 26 USC 411, and related internal revenue
service regulations applicable to governmental plans.
(7) Notwithstanding any other provision of this act to the
contrary that would limit a distributee's election under this act,
a distributee may elect, at the time and in the manner prescribed
by the retirement board, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover. This subsection
applies to distributions made on or after January 1, 1993.
(8) For purposes of determining actuarial equivalent
retirement allowances under sections 31(1)(a) and (b) and 20(2),
the actuarially assumed interest rate shall be 8% with utilization
of the 1983 group annuity and mortality table.
(9) Notwithstanding any other provision of this act, the
compensation of a member of the retirement system shall be taken
into account for any year under the retirement system only to the
extent that it does not exceed the compensation limit established
in section 401(a)(17) of the internal revenue code, 26 USC 401, as
adjusted by the commissioner of internal revenue. This subsection
Senate Bill No. 1639 as amended December 2, 2008
applies to any person who first becomes a member of the retirement
system on or after October 1, 1996.
(10) Notwithstanding any other provision of this act,
contributions, benefits, and service credit with respect to
qualified military service will be provided under the retirement
system in accordance with section 414(u) of the internal revenue
code, 26 USC 414. This subsection applies to all qualified military
service on or after December 12, 1994. Beginning on January 1,
2007, in accordance with section <<401(A)(37)>> of the internal revenue
code, 26 USC 401, if a member dies while performing qualified
military service for purposes of determining death benefits payable
under this act, the member shall be treated as having resumed and
then terminated employment because of death.