January 23, 2007, Introduced by Reps. Palmer, Acciavatti, DeRoche, Garfield, Hoogendyk, Amos, Meekhof, Opsommer, Pastor, Agema and Stahl and referred to the Committee on Education.
A bill to amend 1980 PA 300, entitled
"The public school employees retirement act of 1979,"
by amending sections 4, 8, 25, 26, 34, 61, 91, and 108 (MCL
38.1304, 38.1308, 38.1325, 38.1326, 38.1334, 38.1361, 38.1391, and
38.1408), section 4 as amended by 2003 PA 17, sections 8, 25, and
26 as amended by 1997 PA 143, sections 34 and 108 as amended by
2002 PA 94, section 61 as amended by 2006 PA 158, and section 91 as
amended by 2004 PA 117, and by adding sections 41b, 60, 109, 110,
111, and 112 and article 7.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 4. (1) "Compound interest" means interest compounded
annually on July 1 on the contributions on account as of the
previous July 1 and computed at the rate of investment return
determined under section 104a(1) for the last completed state
fiscal year.
(2) "Contributory service" means credited service other than
noncontributory service.
(3) "Deferred member" means a member who has ceased to be a
public school employee and has satisfied the requirements of
section 82 for a deferred vested service retirement allowance.
(4) "Department" means the department of management and
budget.
(5) "Designated date" means September 30, 1997.
(6) "Direct rollover" means a payment by the retirement system
to the eligible retirement plan specified by the distributee.
(7) "Distributee" includes a member or deferred member.
Distributee also includes the member's or deferred member's
surviving spouse or the member's or deferred member's spouse or
former spouse under an eligible domestic relations order, with
regard to the interest of the spouse or former spouse.
(8) Beginning January 1, 2002, except as otherwise provided in
this subsection, "eligible retirement plan" means an individual
retirement account described in section 408(a) of the internal
revenue code, an individual retirement annuity described in section
408(b) of the internal revenue code, an annuity plan described in
section 403(a) of the internal revenue code, or a qualified trust
described in section 401(a) of the internal revenue code, an
annuity contract described in section 403(b) of the internal
revenue code, or an eligible plan under section 457(b) of the
internal revenue code which is maintained by a state, political
subdivision of a state, or an agency or instrumentality of a state
or political subdivision of a state and which agrees to separately
account for amounts transferred into such eligible plan under
section 457(b) of the internal revenue code from this retirement
system, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to a surviving spouse, an eligible retirement plan
means an individual retirement account or an individual retirement
annuity described above.
(9) Beginning January 1, 2002, "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) 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, except to the extent that the portion of a distribution
that is not includable in federal gross income is paid to either of
the following:
(i) An individual retirement account or annuity described in
section 408(a) or (b) of the internal revenue code.
(ii) A qualified defined contribution plan as described in
section 401(a) or 403(a) of the internal revenue code that agrees
to separately account for amounts transferred, including separately
accounting for the portion of the distribution that is includable
in gross income and the portion of the distribution which is not
includable in gross income.
(10) "Employee organization professional services leave" or
"professional services leave" means a leave of absence that is
renewed annually by the reporting unit so that a member may accept
a position with a public school employee organization to which he
or she belongs and which represents employees of a reporting unit
in employment matters. The member shall be included in membership
of the retirement system during a professional services leave if
all of the conditions of section 71(5) and (6) are satisfied.
(11) "Employee organization professional services released
time" or "professional services released time" means a portion of
the school fiscal year during which a member is released by the
reporting unit from his or her regularly assigned duties to engage
in employment matters for a public school employee organization to
which he or she belongs. The member's compensation received or
service rendered, or both, as applicable, by a member while on
professional services released time shall be reportable to the
retirement system if all of the conditions of section 71(5) and (6)
are satisfied.
(12) "Final average compensation" means the aggregate amount
of a member's compensation earned within the averaging period in
which the aggregate amount of compensation was highest divided by
the member's number of years, including any fraction of a year, of
credited service during the averaging period. The averaging period
shall be 36 consecutive calendar months if the member contributes
to the member investment plan; otherwise, the averaging period
shall be 60 consecutive calendar months. If the member has less
than 1 year of credited service in the averaging period, the number
of consecutive calendar months in the averaging period shall be
increased to the lowest number of consecutive calendar months that
contains 1 year of credited service.
(13) "Health benefits" means hospital, medical-surgical, and
sick care benefits and dental, vision, and hearing benefits for
retirants, retirement allowance beneficiaries, and health insurance
dependents provided pursuant to section 91.
(14) "Implementation date" means July 1, 2007.
(15) (14)
"Internal revenue code" means the United States
internal revenue code of 1986.
(16) (15)
"Long-term care insurance" means group insurance
that is authorized by the retirement system for retirants,
retirement allowance beneficiaries, and health insurance
dependents, as that term is defined in section 91, to cover the
costs of services provided to retirants, retirement allowance
beneficiaries, and health insurance dependents, from nursing homes,
assisted living facilities, home health care providers, adult day
care providers, and other similar service providers.
(17) (16)
"Member investment plan" means the program of member
contributions described in section 43a.
(18) "Plan document" means the document that contains the
provisions and procedures of Tier 2 in conformity with this act and
the internal revenue code.
Sec. 8. (1) "Service" means personal service performed as a
public school employee or creditable under this act.
(2) "Simple interest" means interest at 1 or more rates per
annum determined by the retirement board.
(3) "State of Michigan service" means service performed as a
state employee in the classified or unclassified service under the
state employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69.
(4) "Teacher" means a person employed by a reporting unit who
is engaged in teaching, who is engaged in administering and
supervising teaching, or who is under a teacher's contract with a
reporting unit.
(5) "Tier 1" means the retirement plan available to a member
under this act who was first employed by a reporting unit before
the implementation date and who does not elect to become a
qualified participant of Tier 2.
(6) "Tier 2" means the retirement plan or plans established
pursuant to the plan documents that are available to qualified
participants under sections 109 to 112 and article 7.
(7) (5) "Transitional public employment
program" means
participation in public service employment programs in the areas of
environmental quality, health care, education, public safety, crime
prevention and control, prison rehabilitation, transportation,
recreation, maintenance of parks, streets, and other public
facilities, solid waste removal, pollution control, housing and
neighborhood improvements, rural development, conservation,
beautification, veterans' outreach, and other fields of human
betterment and community improvement as part of a program of
comprehensive manpower services authorized, undertaken, and
financed under the comprehensive employment and training act of
1973, former Public Law 93-203, 87 Stat. 839.
Sec. 25. (1) The board shall have only the rights, authority,
and discretion in the proper discharge of its duties provided in
this act and former 1945 PA 136.
(2)
The Except as otherwise
provided in this section, the
retirement board may promulgate rules pursuant to the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328, for the implementation and administration of this act. The
retirement board shall not promulgate rules for the establishment,
implementation, administration, operation, investment, or
distribution of a Tier 2 retirement plan.
Sec. 26. (1) This section does not apply to Tier 2.
(2) (1) The state treasurer shall be treasurer
of the
retirement system and shall have investment authority, including
the custodianship of the funds of the retirement system, and shall
have fiduciary responsibility with regard to the investment of
funds of the retirement system.
(3) (2)
The state treasurer shall deposit the funds of the
retirement system in the same manner and subject to the law
governing the deposit of state funds by the treasurer. Income
earned by the retirement system's funds shall be credited to the
respective reserves under this act that earned the income.
Sec. 34. (1) The reserve for health benefits is the account to
which payments of reporting units, subscriber copayments, and
payments by the retirement system under section 136 for health
benefits
are credited. Benefits payable pursuant to section 91
sections 91 and 136 shall be paid from the reserve for health
benefits. The assets and any earnings on the assets contained in
the reserve for health benefits and the health advance funding
subaccount are not to be treated as pension assets for any purpose.
(2) The health advance funding subaccount is the account to
which amounts transferred pursuant to section 41 are credited.
Except as otherwise provided in this section, any amounts received
in the health advance funding subaccount and accumulated earnings
on those amounts shall not be expended until the actuarial accrued
liability for health benefits under section 91 is at least 100%
funded. The department may expend funds or transfer funds to
another account to expend for health benefits under section 91 if
the actuarial accrued liability for health benefits under section
91 is at least 100% funded. For each fiscal year that begins after
the first fiscal year in which the actuarial accrued liability for
health benefits under section 91 is at least 100% funded by the
health advance funding subaccount, the amounts may be expended or
credited to fund health benefits provided under section 91 as
provided in section 41(2).
(3) Notwithstanding any other provision of this section, the
department may transfer amounts from the health advance funding
subaccount to the reserve for employer contributions established in
section 30 if the department does both of the following:
(a) At least 45 days before the intended transfer, submits a
request to the chairs of the senate and house appropriations
committees and, at least 15 days before the intended transfer,
obtains the approval of both the senate and house appropriations
committees.
(b) Ensures that the request submitted to the senate and house
appropriations committees contains an actuarial valuation prepared
pursuant to section 41 that demonstrates that as of the beginning
of a fiscal year, and after all credits and transfers required by
this act for the previous fiscal year have been made, the sum of
the actuarial value of assets and the actuarial present value of
future normal cost contributions does not exceed the actuarial
present value of benefits.
Sec. 41b. For fiscal years that begin on or after the
effective date of this section, the annual level percentage of
payroll contribution rate as it applies to the unfunded actuarial
accrued liability determined under section 41 shall be based on and
applied to the combined payrolls for members of Tier 1 and
qualified participants of Tier 2.
Sec. 60. (1) This section applies to all service credit
purchased by a member under this act if the member elects to
purchase service credit after July 1, 2007. On and after July 1,
2007, a member shall not purchase service credit under this act
unless the member has at least 2 years of credited service as a
public school employee.
(2) After July 1, 2007, if a member elects to purchase service
credit and becomes a retirant under section 43b, 81, or 82, the
member shall only receive health benefits as determined under
section 91(10).
Sec.
61. (1) Except as otherwise provided in this section, if
a retirant is receiving a retirement allowance other than a
disability allowance payable under this act or under former 1945 PA
136, on account of either age or years of personal service
performed, or both, and becomes employed by a reporting unit or is
hired on a contractual basis as an independent contractor by a
reporting unit, the following shall take place:
(a) The retirant shall not be entitled to a new final average
compensation or additional service credit under this retirement
system unless additional service is performed equivalent to 5 or
more years of service credit or, if the retirant has contributed to
the member investment plan, the equivalent of 3 or more years of
service credit. The retirant may elect to have the retirement
allowance recomputed based on the added credit or the final average
compensation resulting from the added service, or both. A
retirement allowance shall not be recomputed until the retirant
pays into the retirement system an amount equal to the retirant's
new final average compensation multiplied by the percentage
determined under section 41(2) for normal cost and unfunded
actuarial accrued liabilities, not including the percentage
required for the funding of health benefits, multiplied by the
total service credit in the period in which the retirant's
additional service was performed.
(b) The retirant's retirement allowance shall be reduced by
the lesser of the amount that the earnings in a calendar year
exceed the amount permitted without a reduction of benefits under
the social security act, chapter 531, 49 Stat. 620, or 1/3 of the
retirant's final average compensation. For purposes of computing
allowable earnings under this subdivision, the final average
compensation shall be increased by 5% for each full year of
retirement.
(2)
The retirement system may offset retirement benefits
payable
under this act against amounts owed to the retirement
system
by a retirant or retirement allowance beneficiary.
(3)
Subsection (1) does not apply to a retirant if all of the
following
circumstances exist:
(a)
The retirant is a former teacher or administrator employed
in
a teaching or research capacity by a university that is
considered
a reporting unit for the limited purpose described in
section
7(3).
(b)
The retirant is not eligible to use any service or
compensation
attributable to the employment described in
subdivision
(a) for a recomputation of his or her retirement
allowance.
(c)
A university that employs a retirant pursuant to this
subsection
shall report such employment to the retirement system by
July
1 of each year. The report to be filed shall include the name
of
the retirant, the capacity in which the retirant is employed,
and
the total annual compensation paid to the retirant.
(4)
Until July 1, 2011, subsection (1) does not apply to a
retirant
if all of the following circumstances exist:
(a)
The retirant is employed by a reporting unit that has an
approved
emergency situation, not including a situation caused by a
labor
dispute, that necessitates the hiring of a retirant in the
capacity
of a teacher, principal, stationary engineer,
administrator,
or other category as determined by the
superintendent
of public instruction to prevent depriving students
of
an education. The chief executive officer or superintendent of
the
school district shall include with the written notification
documentation
showing that more than 8% of all classes in the
district
during the 1998-99 school year are taught by full-time
substitute
teachers who are not certificated in the subjects or
grade
levels which they teach. Within 30 days after receipt of the
notification
and documentation under this subdivision, the
department
of education shall notify the chief executive officer or
superintendent
and the retirement system of its approval or
disapproval
of the emergency situation. If disapproved by the
department
of education, this subsection does not apply.
(b)
The retirant is employed under an emergency situation
described
in subdivision (a) for a period not to exceed 6 years.
(c)
The retirant is not eligible to use any service or
compensation
attributable to the employment described in
subdivision
(a) for a recomputation of his or her retirement
allowance.
(5)
On or before July 1, 1999, the state superintendent of
public
instruction shall compile a listing of critical shortage
disciplines.
This listing shall be updated annually.
(6)
Until July 1, 2011, subsection (1) does not apply to a
retirant
if all of the following circumstances exist:
(a)
The retirant is employed by a reporting unit that has a
situation,
not including a situation caused by a labor dispute,
that
necessitates the hiring of a retirant in an area that has been
identified
by the state superintendent of public instruction as a
critical
shortage discipline pursuant to subsection (5).
(b)
The retirant is employed under a situation described in
subdivision
(a) for a period not to exceed 6 years.
(c)
The retirant is not eligible to use any service or
compensation
attributable to the employment described in
subdivision
(a) for a recomputation of his or her retirement
allowance.
(7)
The provisions of subsections (4) and (6) shall only apply
for
retirants who have been retired for at least 12 months before
becoming
employed under this section.
Sec.
91. (1) The Except as otherwise
provided in this section,
the retirement system shall pay the entire monthly premium or
membership or subscription fee for hospital, medical-surgical, and
sick care benefits for the benefit of a retirant or retirement
allowance beneficiary who elects coverage in the plan authorized by
the retirement board and the department.
(2) The retirement system may pay up to the maximum of the
amount payable under subsection (1) toward the monthly premium for
hospital, medical-surgical, and sick care benefits for the benefit
of a retirant or retirement allowance beneficiary enrolled in a
group health insurance or prepaid service plan not authorized by
the retirement board and the department, if enrolled before June 1,
1975, for whom the retirement system on July 18, 1983 was making a
payment towards his or her monthly premium.
(3) A retirant or retirement allowance beneficiary receiving
hospital, medical-surgical, and sick care benefits coverage under
subsection (1) or (2), until eligible for medicare, shall have an
amount equal to the cost chargeable to a medicare recipient for
part B of medicare deducted from his or her retirement allowance.
(4) The retirement system shall pay 90% of the monthly premium
or membership or subscription fee for dental, vision, and hearing
benefits for the benefit of a retirant or retirement allowance
beneficiary who elects coverage in the plan authorized by the
retirement board and the department. Payments shall begin under
this subsection upon approval by the retirement board and the
department of plan coverage and a plan provider.
(5) The retirement system shall pay up to 90% of the maximum
of the amount payable under subsection (1) toward the monthly
premium or membership or subscription fee for hospital, medical-
surgical, and sick care benefits coverage described in subsections
(1) and (2) for each health insurance dependent of a retirant
receiving benefits under subsection (1) or (2). Payment shall not
exceed 90% of the actual monthly premium or membership or
subscription fee. The retirement system shall pay 90% of the
monthly premium or membership or subscription fee for dental,
vision, and hearing benefits described in subsection (4) for the
benefit of each health insurance dependent of a retirant receiving
benefits under subsection (4). Payment for health benefits coverage
for a health insurance dependent of a retirant shall not be made
after the retirant's death, unless the retirant designated a
retirement allowance beneficiary as provided in section 85 and the
dependent was covered or eligible for coverage as a health
insurance dependent of the retirant on the retirant's date of
death. Payment for health benefits coverage shall not be made for a
health insurance dependent after the later of the retirant's death
or the retirement allowance beneficiary's death. Payment under this
subsection and subsection (6) began October 1, 1985 for health
insurance dependents who on July 10, 1985 were covered by the
hospital, medical-surgical, and sick care benefits plan authorized
by the retirement board and the department. Payment under this
subsection and subsection (6) for other health insurance dependents
shall not begin before January 1, 1986.
(6) The payment described in subsection (5) shall also be made
for each health insurance dependent of a deceased member or
deceased duty disability retirant if a retirement allowance is
being paid to a retirement allowance beneficiary because of the
death of the member or duty disability retirant as provided in
section 43c(c), 89, or 90. Payment for health benefits coverage for
a health insurance dependent shall not be made after the retirement
allowance beneficiary's death.
(7) The payments provided by this section shall not be made on
behalf of a retiring section 82 deferred member or health insurance
dependent of a deferred member having less than 21 full years of
attained credited service or the retiring deferred member's
retirement allowance beneficiary, and shall not be made on behalf
of a retirement allowance beneficiary of a deferred member who dies
before
retiring. The Except as
otherwise provided in subsection
(10), the retirement system shall pay, on behalf of a retiring
section 82 deferred member or health insurance dependent of a
deferred member or a retirement allowance beneficiary of a deceased
deferred member, either of whose allowance is based upon not less
than 21 years of attained credited service, 10% of the payments
provided by this section, increased by 10% for each attained full
year of credited service beyond 21 years, not to exceed 100%. This
subsection applies to any member who attains deferred status under
section 82 after October 31, 1980.
(8) Any retirant or retirement allowance beneficiary excluded
from payments under this section may participate in the hospital,
medical-surgical, and sick care benefits plan, the dental plan,
vision plan, or hearing plan, or any combination of the plans
described in this section in the manner prescribed by the
retirement system at his or her own cost.
(9) The hospital, medical-surgical, and sick care benefits
plan, dental plan, vision plan, and hearing plan that covers
retirants, retirement allowance beneficiaries, and health insurance
dependents pursuant to this section shall contain a coordination of
benefits provision that provides all of the following:
(a) If the person covered under the hospital, medical-
surgical, and sick care benefits plan is also eligible for medicare
or medicaid, or both, then the benefits under medicare or medicaid,
or both, shall be determined before the benefits of the hospital,
medical-surgical, and sick care benefits plan provided pursuant to
this section.
(b) If the person covered under any of the plans provided by
this section is also covered under another plan that contains a
coordination of benefits provision, the benefits shall be
coordinated as provided by the coordination of benefits act, 1984
PA 64, MCL 550.251 to 550.255.
(c) If the person covered under any of the plans provided by
this section is also covered under another plan that does not
contain a coordination of benefits provision, the benefits under
the other plan shall be determined before the benefits of the plan
provided pursuant to this section.
(10) This subsection only applies to a retirant who elects to
purchase service credit on or after July 1, 2007. A retirant who
elects to purchase service credit after July 1, 2007 shall have his
or her benefits under this section determined by the retirement
system in the manner prescribed in this subsection. The retirement
system shall first determine whether the purchase of service credit
allowed the retirant to retire earlier than the retirant would have
retired without the purchase of service credit. The retirement
system shall then determine the difference between the retirant's
effective date and the effective date that the retirant would have
retired if the retirant had not purchased the service credit. The
retirant who is subject to this subsection shall not be eligible
for health care benefits under this section until the effective
date that the retirant would have retired if the retirant had not
purchased the service credit.
(11) (10)
For purposes of this section:
(a) "Health insurance dependent" means any of the following:
(i) The spouse of the retirant or the surviving spouse to whom
the retirant or deceased member was married at the time of the
retirant's or deceased member's death.
(ii) An unmarried child, by birth or adoption, of the retirant
or deceased member, until December 31 of the calendar year in which
the child becomes 19 years of age.
(iii) An unmarried child, by birth or adoption, of the retirant
or deceased member, until December 31 of the calendar year in which
the child becomes 25 years of age, who is enrolled as a full-time
student, and who is or was at the time of the retirant's or
deceased member's death a dependent of the retirant or deceased
member as defined in section 152 of the internal revenue code.
(iv) An unmarried child, by birth or adoption, of the retirant
or deceased member who is incapable of self-sustaining employment
because of mental or physical disability, and who is or was at the
time of the retirant's or deceased member's death a dependent of
the retirant or deceased member as defined in section 152 of the
internal revenue code.
(v) The parents of the retirant or deceased member, or the
parents of his or her spouse, who are residing in the household of
the retirant or retirement allowance beneficiary.
(vi) An unmarried child who is not the child by birth or
adoption of the retirant or deceased member but who otherwise
qualifies to be a health insurance dependent under subparagraph
(ii), (iii), or (iv), if the retirant or deceased member is the legal
guardian of the unmarried child.
(b) "Medicaid" means benefits under the federal medicaid
program established under title XIX of the social security act,
chapter
531, 49 Stat. 620, 42 U.S.C. USC
1396 to 1396f, 1396g-1 to
1396r-6, and 1396r-8 to 1396v.
(c) "Medicare" means benefits under the federal medicare
program established under title XVIII of the social security act,
chapter
531, 49 Stat. 620, 42 U.S.C. USC
1395 to 1395b, 1395b-2,
1395b-6 to 1395b-7, 1395c to 1395i, 1395i-2 to 1395i-5, 1395j to
1395t, 1395u to 1395w, 1395w-2 to 1395w-4, 1395w-21 to 1395w-28,
1395x to 1395yy, and 1395bbb to 1395ggg.
Sec. 108. (1) This section is enacted pursuant to federal law
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 and that the
trust be an exempt organization under section 501 of the internal
revenue code. The department shall administer the retirement system
to fulfill this intent.
(2)
Except as otherwise provided in this section, employer-
financed
benefits provided by the retirement system under this act
shall
not exceed $10,000.00 per year for a retirant who has 15 or
more
years of credited service at retirement.
(3)
Employer-financed benefits provided by the retirement
system
under this act shall not exceed the limitation under
subsection
(2) unless application of this subsection results in a
higher
limitation. The higher limitation of this subsection applies
to
employer-financed benefits provided by the retirement system
and,
for purposes of section 415(b) of the internal revenue code,
applies
to aggregated benefits received from all qualified pension
plans
administered by the department of management and budget,
office
of retirement systems. Employer-financed benefits provided
by
the retirement system shall not exceed the lesser of the
following:
(a)
One of the following amounts that is applicable to the
member:
(i) If a member retires at age 62 or older, $90,000.00
or the
adjusted
amount described in subsection (4) per year.
(ii) If a member retires at or after age 55 but before
age 62,
the
actuarially reduced amount of the limitation prescribed in
subparagraph
(i) per year. The retirement system shall use an
interest
rate of 5% per year compounded annually to calculate the
actuarial
reduction in this subparagraph. However, the limitation
in
this subparagraph shall not be actuarially reduced below
$75,000.00.
(iii) If a member retires before age 55, the actuarially
reduced
amount
of the limitation prescribed in subparagraph (ii) per year.
The
retirement system shall use an interest rate of 5% per year
compounded
annually to calculate the actuarial reduction in this
subparagraph.
(b)
100% of the member's average compensation for high 3 years
as
described in section 415(b)(3) of the internal revenue code.
(4)
Section 415(d) of the internal revenue code requires the
secretary
of the treasury or his or her delegate to annually adjust
the
$10,000.00 limitation described in subsection (2) and the
$90,000.00
limitation described in subsection (3)(a)(i) for
increases
in cost of living, beginning in 1988. This section shall
be
administered using the limitations applicable to each calendar
year
as adjusted by the secretary of the treasury or his or her
delegate
under section 415(d) of the internal revenue code. The
retirement
system shall adjust the benefits subject to the
limitation
each year to conform with the adjusted limitation.
(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. 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 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) (5)
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,
deferred members, retirants, and retirement allowance
beneficiaries.
(4) (6)
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) (7)
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.
(6) (8)
If the retirement system is terminated, the interest
of the members, deferred 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 and the related internal revenue service
regulations applicable to governmental plans.
(7) (9)
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) (10)
For purposes of determining actuarial equivalent
retirement allowances under sections 45 and 85(1)(b), (1)(c),
(1)(d), and (2), the actuarially assumed interest rate shall be 8%
with utilization of the 1983 group annuity and mortality table.
(11)
Notwithstanding any other provision of this section, the
retirement
system shall be administered in compliance with the
provisions
of section 415 of the internal revenue code and revenue
service
regulations under that section that are applicable to
governmental
plans. If there is a conflict between this section and
another
section of this or any other act of this state, this
section
prevails.
(9) (12)
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, as adjusted by
the commissioner of internal revenue. This subsection applies to
any person who first becomes a member of the retirement system on
or after October 1, 1996.
(10) (13)
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. This subsection applies to all qualified military service on
or after December 12, 1994.
Sec. 109. (1) An individual who was a deferred member or
former nonvested member on the day before the implementation date,
who is employed by a reporting unit on or after the implementation
date, and who by virtue of that employment would be eligible for
membership in Tier 1 may make an election as prescribed in section
110.
(2) An individual who is first employed and entered upon the
payroll of a reporting unit on or after the implementation date
shall become a qualified participant of Tier 2. The date of
membership in Tier 1 or participation in Tier 2 under this
subsection dates back to the date the individual was first employed
and entered upon the payroll of a reporting unit.
Sec. 110. (1) Except as otherwise provided in subsection (2),
the retirement system shall provide an opportunity for each member
who is a Tier 1 member on the day before the implementation date,
to elect in writing to terminate membership in Tier 1 and elect to
become a qualified participant in Tier 2. An election made by a
member under this subsection is irrevocable. The retirement system
shall accept written elections under this subsection from members
during the period beginning on August 31, 2007 and ending on
November 30, 2007. A member who does not make a written election or
who does not file the election during the period specified in this
subsection continues to be a member of Tier 1. A member who makes
and files a written election under this subsection elects to do all
of the following:
(a) Cease to be a member of Tier 1 effective 12 midnight on
December 31, 2007.
(b) Become a qualified participant in Tier 2 effective 12:01
a.m. on January 1, 2008.
(c) Except as otherwise provided in this subdivision, waive
all of his or her rights to a pension, an annuity, a retirement
allowance, or any other benefit under Tier 1 effective 12 midnight
on the day described in subdivision (a). This subdivision does not
affect a person's right to health benefits provided under this act
pursuant to section 136.
(2) This subsection applies to an individual who was a vested
member of Tier 1 on the day before the implementation date and who
terminates the employment upon which that membership is based on or
after the implementation date but on or before December 31, 2007.
Before the termination of his or her employment, an individual
described in this subsection may elect in writing to terminate
membership in Tier 1 and become a qualified participant in Tier 2.
An election made by a member under this subsection is irrevocable.
The retirement system shall accept written elections under this
subsection from a member during the period beginning on the
implementation date and ending on December 31, 2007. A member
described in this subsection who does not make a written election
or who does not file the election before the termination of his or
her employment continues to be a member or deferred member of Tier
1. A member who makes and files a written election under this
subsection to terminate membership in Tier 1 elects to do all of
the following:
(a) Cease to be a member of Tier 1 and become a qualified
participant in Tier 2 effective 12 midnight on the day immediately
preceding the date of the termination of employment.
(b) Become a former qualified participant in Tier 2 effective
12:01 a.m. on the day immediately following the date described in
subdivision (a).
(c) Except as otherwise provided in this subdivision, waive
all of his or her rights to a pension, an annuity, a retirement
allowance, an insurance benefit, or any other benefit under Tier 1
effective 12 midnight on the date described in subdivision (a).
This subdivision does not affect an individual's right to health
benefits provided under this act pursuant to section 136.
(3) If an individual who was a deferred member on the day
before the implementation date or an individual who was a former
nonvested member on the day before the implementation date is
employed by a reporting unit on or after the implementation date
and by virtue of that employment is again eligible for membership
in Tier 1, the individual shall elect in writing to remain a member
of Tier 1 or to terminate membership in Tier 1 and become a
qualified participant in Tier 2. An election made by a deferred
member or a former nonvested member under this subsection is
irrevocable. The retirement system shall accept written elections
under this subsection from a deferred member or a former nonvested
member during the period beginning on the date of the individual's
reemployment and ending upon the expiration of 60 days after the
date of that reemployment. A deferred member or former nonvested
member who makes and files a written election to remain a member of
Tier 1 retains all rights and is subject to all conditions as a
member of Tier 1 under this act. A deferred member or former
nonvested member who does not make a written election or who does
not file the election during the period specified in this
subsection continues to be a member of Tier 1. A deferred member or
former nonvested member who makes and files a written election to
terminate membership in Tier 1 elects to do all of the following:
(a) Cease to be a member of Tier 1 effective 12 midnight on
the last day of the payroll period that includes the date of the
election.
(b) Become a qualified participant in Tier 2 effective 12:01
a.m. on the first day of the payroll period immediately following
the date of the election.
(c) Except as otherwise provided in this subdivision, waive
all of his or her rights to a pension, an annuity, a retirement
allowance, an insurance benefit, or any other benefit under Tier 1
effective 12 midnight on the last day of the payroll period that
includes the date of the election. This subdivision does not affect
an individual's right to health benefits provided under this act
pursuant to section 136.
(4) After consultation with the retirement system's actuary
and the retirement board, the department shall determine the method
by which a member, deferred member, or former nonvested member
shall make a written election under this section. If the member,
deferred member, or former nonvested member is married at the time
of the election, the election is not effective unless the election
is signed by the individual's spouse. However, the retirement board
may waive this requirement if the spouse's signature cannot be
obtained because of extenuating circumstances.
(5) An election under this section is subject to the eligible
domestic relations order act, 1991 PA 46, MCL 38.1701 to 38.1711.
(6) If an individual who was a deferred member of the state
employees' retirement system on the day before the implementation
date is first employed and entered upon the payroll of a reporting
unit on or after the implementation date, the retirement system
shall provide an opportunity for that individual to elect in
writing to become a member of Tier 1 or to become a qualified
participant of Tier 2. The retirement system and the individual
shall follow the provisions and procedures provided in this section
and by the department as if the individual were a deferred member
of Tier 1 on the day before the implementation date.
(7) If the department receives notification from the United
States internal revenue service that this section or any portion of
this section will cause the retirement system to be disqualified
for tax purposes under the internal revenue code, then the portion
that will cause the disqualification does not apply.
Sec. 111. (1) For a member who elects to terminate membership
in Tier 1 under section 110(1), the retirement system shall direct
the state treasurer to transfer a lump sum amount from the
appropriate reserve created under article 2 to the qualified
participant's account in Tier 2 on or before July 1, 2008. The
retirement system shall calculate the amount to be transferred,
which shall be equal to the sum of the following:
(a) The member's accumulated contributions, if any, from the
reserve for employee contributions as of 12 midnight December 31,
2007.
(b) For a member who is a participant in the member investment
plan, the member's accumulated contributions, if any, from the
reserve for member investment plan as of 12 midnight December 31,
2007.
(c) For a member who is vested under section 81 as of 12
midnight December 31, 2007, the excess, if any, of the actuarial
present value of the member's accumulated benefit obligation, over
the amount specified in subdivisions (a) and (b), from the reserve
for employer contributions. Except as provided in subsection (7),
for the purposes of this subsection, the present value of the
member's accumulated benefit obligation is based upon the member's
actual credited service and actual final average compensation as of
12 midnight December 31, 2007. The actuarial present value shall be
computed as of 12 midnight December 31, 2007 and shall be based on
the following:
(i) Eight percent effective annual interest, compounded
annually.
(ii) A 50% male and 50% female gender neutral blend of the
mortality tables used to project retirant longevity in the most
recent actuarial valuation report.
(iii) A benefit commencement age, based upon the member's
estimated credited service as of 12 midnight December 31, 2007. The
benefit commencement age shall be the younger of the following, but
shall not be younger than the member's age as of 12 midnight
December 31, 2007:
(A) Age 60.
(B) Age 55, if the member's estimated credited service equals
or exceeds 30 years.
(C) The age of the member if the member's credited service
equals or exceeds 30 years and the member contributes to the member
investment plan.
(D) Interest on any amounts determined in subdivisions (a),
(b), and (c) from January 1, 2008 to the date of the transfer,
based upon 8% annual interest, compounded annually.
(2) For a member who elects to terminate membership in Tier 1
under section 110(2), the retirement system shall direct the state
treasurer to transfer a lump sum amount from the appropriate
reserve created under article 2 to the former qualified
participant's account in Tier 2 on or before the expiration of 60
days after the date of the individual's termination of employment.
The retirement system shall calculate the amount to be transferred,
which shall be equal to the sum of the following:
(a) The member's accumulated contributions, if any, from the
reserve for employee contributions as of 12 midnight on the day
immediately preceding the date of the termination of employment.
(b) For a member who is a participant in the member investment
plan, the member's accumulated contributions, if any, from the
reserve for member investment plan as of 12 midnight on the day
immediately preceding the date of the termination of employment.
(c) The excess of any actuarial present value of the member's
accumulated benefit obligation, over the amount specified in
subdivisions (a) and (b), from the reserve for employer
contributions. Except as provided in subsection (7), for the
purposes of this subsection, the present value of the member's
accumulated benefit obligation is based upon the member's actual
credited service and actual final average compensation as of 12
midnight on the day immediately preceding the date of the
termination of employment. The actuarial present value shall be
computed as of 12 midnight on that date and shall be based on the
following:
(i) Eight percent effective annual interest, compounded
annually.
(ii) A 50% male and 50% female gender neutral blend of the
mortality tables used to project retirant longevity in the most
recent annual actuarial valuation report.
(iii) A benefit commencement age, based upon the member's
estimated credited service as of 12 midnight on the day immediately
preceding the date of the termination of employment. The benefit
commencement age shall be the younger of the following, but shall
not be younger than the member's age as of 12 midnight on the day
immediately preceding the date of the termination of employment:
(A) Age 60.
(B) Age 55, if the member's estimated credited service equals
or exceeds 30 years.
(C) The age of the member if the member's credited service
equals or exceeds 30 years and the member is a participant of the
member investment plan.
(D) Interest on any amounts determined in subdivisions (a),
(b), and (c) from the day immediately following the date described
in subdivision (a) to the date of the transfer, based upon 8%
effective annual interest, compounded annually.
(3) For a deferred member who elects to terminate membership
in Tier 1 under section 110(3), the retirement system shall direct
the state treasurer to transfer a lump sum amount from the
appropriate reserve created under article 2 to the qualified
participant's account in Tier 2 on or before the expiration of 60
days after the date of the individual's election to terminate
membership. The retirement system shall calculate the amount to be
transferred, which shall be equal to the sum of the following:
(a) The deferred member's accumulated contributions, if any,
from the reserve for employee contributions as of 12 midnight on
the last day of the payroll period that includes the date of the
election.
(b) For a deferred member who is a participant in the member
investment plan, the deferred member's accumulated contributions,
if any, from the reserve for member investment plan as of 12
midnight on the last day of the payroll period that includes the
date of the election.
(c) The excess, if any, of the actuarial present value of the
deferred member's accumulated benefit obligation, over the amount
specified in subdivisions (a) and (b), from the reserve for
employer contributions. Except as provided in subsection (5), for
the purposes of this subsection, the present value of the deferred
member's accumulated benefit obligation is based upon the deferred
member's actual credited service and actual final average
compensation as of 12 midnight on the last day of the payroll
period that includes the date of the election. The actuarial
present value shall be computed as of 12 midnight on that date and
shall be based on the following:
(i) Eight percent effective annual interest, compounded
annually.
(ii) A 50% male and 50% female gender neutral blend of the
mortality tables used to project retirant longevity in the most
recent annual actuarial valuation report.
(iii) A benefit commencement age, based upon the member's
estimated credited service as of 12 midnight on the last day of the
payroll period that includes the date of the election. The benefit
commencement age shall be the younger of the following, but shall
not be younger than the member's age as of 12 midnight on the last
day of the payroll period that includes the date of the election:
(A) Age 60.
(B) Age 55, if the deferred member's estimated credited
service equals or exceeds 30 years.
(C) The age of the deferred member if the deferred member's
credited service equals or exceeds 30 years and the deferred member
is a participant of the member investment plan.
(D) Interest on any amounts determined in subdivisions (a),
(b), and (c) from the first day of the payroll period immediately
following the date of the election to the date of the transfer,
based upon 8% effective annual interest, compounded annually.
(4) For the purposes of subsections (1) to (3) and subsection
(6), the calculation of actual present value of the member's or
deferred member's accumulated benefit obligation shall be based
upon methods adopted by the department and the retirement system's
actuary in consultation with the retirement board. Actual final
average compensation shall be determined as provided in sections 3a
and 4(11) as of 12 midnight on the date the member or deferred
member ceases to be a member of Tier 1 under section 110.
(5) For a former nonvested member who elects to terminate
membership in Tier 1 under section 110(3) and who has accumulated
contributions standing to his or her credit in the reserve for
employee contributions or the reserve for member investment plan,
the retirement system shall direct the state treasurer to transfer
a lump sum amount from the appropriate reserve created under
article 2 to the qualified participant's account in Tier 2 on or
before the expiration of 60 days after the date of the individual's
election to terminate membership. The retirement system shall
calculate the amount to be transferred, which shall be equal to the
sum of the following:
(a) The former nonvested member's accumulated contributions,
if any, from the reserve for employee contributions as of 12
midnight on the last day of the payroll period that includes the
date of the election.
(b) For a former nonvested member who is a participant in the
member investment plan, the former nonvested member's accumulated
contributions, if any, from the reserve for member investment plan
as of 12 midnight on the last day of the payroll period that
includes the date of the election.
(c) Interest on any amounts determined in subdivisions (a) and
(b) from the first day of the payroll period immediately following
the date of the election to the date of the transfer, based upon 8%
effective annual interest, compounded annually.
(6) For each member who elects to terminate membership in Tier
1 under section 110, the retirement system shall do all of the
following:
(a) Direct the state treasurer to transfer from the reserve
for employer contributions to the qualified participant's account
in Tier 2 the excess of any recomputed amount over the previously
transferred amount together with interest from 12 midnight December
31, 2006 to the date of the transfer under this subsection, based
upon 8% effective annual interest, compounded annually.
(b) Direct the state treasurer to transfer from the qualified
participant's account in Tier 2 to the reserve for employer
contributions the excess of any previously transferred amount over
the recomputed amount, together with interest, from the date of the
transfer made under subsection (1), based upon 8% effective annual
interest, compounded annually.
(7) If the department receives notification from the United
States internal revenue service that this section or any portion of
this section will cause the retirement system to be disqualified
for tax purposes under the internal revenue code, then the portion
that will cause the disqualification does not apply.
Sec. 112. After consulting the retirement system's actuary,
the department shall calculate for each fiscal year any cost
savings that have accrued as a result of the implementation of the
amendatory act that added this section over the costs that would
have been incurred had the amendatory act that added this section
not been implemented.
ARTICLE 7
Sec. 121. For the purposes of this article, the words and
phrases defined in sections 122 to 124 have the meanings ascribed
to them in those sections.
Sec. 122. (1) "Accumulated balance" means the total balance in
a qualified participant's, former qualified participant's, or
refund beneficiary's individual account in Tier 2.
(2) "Compensation" means the remuneration paid a qualified
participant on account of the qualified participant's services
equal to the sum of the following:
(a) A participant's W-2 earnings for services performed for
the employer.
(b) Any amount contributed or deferred at the election of the
participant which is excluded from gross income under section 125,
132(f)(4), 401(k), 403(b), or 457 of the internal revenue code, 26
USC 125, 132, 401, 403, and 457.
(3) "Department" means the department of management and
budget.
(4) "Director" means the director of the department of
management and budget or his or her designee.
Sec. 123. (1) "Employer" means a reporting unit.
(2) "Former qualified participant" means an individual who was
a qualified participant and who terminates the employment upon
which his or her participation is based for any reason.
(3) "Health benefit dependent" means an individual who would
have been eligible for health insurance coverage as a health
insurance dependent under section 91(11)(a) if the former qualified
participant had become a retirant of Tier 1.
Sec. 124. (1) "Qualified participant" means an individual who
is a participant of Tier 2 and who meets 1 of the following
requirements:
(a) An individual who is first employed and entered upon the
payroll of a reporting unit on or after the implementation date.
(b) An individual who elects to terminate membership in Tier 1
and who elects to participate in Tier 2 in the manner prescribed in
section 110.
(2) "Refund beneficiary" means an individual nominated by a
qualified participant or a former qualified participant under
section 134 to receive a distribution of the participant's
accumulated balance in the manner prescribed in section 135.
(3) "State treasurer" means the treasurer of this state.
Sec. 124a. (1) The department shall designate 3 or more Tier 2
contracts or account plans provided by at least 3 different
entities, to be offered to participants in the Tier 2 plan. No Tier
2 plan option shall be designated under this section unless the
entity provides all of the following requirements:
(a) It is authorized to conduct business in this state with
regard to any annuity contracts or certificates to be offered under
the plan.
(b) It provides a defined contribution pension plan and
associated plan services to public sector employees in at least 10
other states.
(c) It provides a Tier 2 option that is an annuity contract or
custodial account that is not required to be held by a separate
plan trustee.
(2) In designating Tier 2 plans under this section, the
department shall consider all of the following:
(a) The experience of the entity in providing the plan in
other states.
(b) The potential effectiveness of the plan in the
recruitment and retention of academic or administrative employees.
(c) The nature and extent of the rights and benefits to be
provided under the plan.
(d) The relationship between the rights and benefits under the
plan and the amount of the contributions made under that plan.
(e) The suitability of the rights and benefits under the plan
to the needs and interests of academic or administrative employees.
(f) The capability of the entity offering the plan to provide
the rights and benefits under the plan, and to monitor compliance
under the contract or account with applicable federal tax
requirements incorporated into the contract or account.
(g) Any other supplemental matters it considers relevant.
(3) The department shall consult with the state treasurer in
determining appropriate investment vehicles offered within the
designated Tier 2 option plans. The department in consultation with
the state treasurer shall periodically review each Tier 2 plan
designated under this section and the entity offering the plan to
ensure that the requirements and purposes of this article are being
met. If the department finds that the entity offering a Tier 2 plan
is not in compliance with any requirement of this section or the
plan is not satisfactorily meeting the purposes of this article, it
may rescind its designation of the plan.
(4) The department shall determine the provisions and
procedures of Tier 2 in conformity with this article and the
requirements of the internal revenue code.
(5) The director shall use a competitive bidding process to
select any managerial, professional, or administrative services for
the proper administration and investment of assets of Tier 2. The
competitive bidding process shall include a requirement that any
service provider selected under this subsection will be required to
pay for the cost of any notification of members entitled to make an
election under section 110.
Sec. 126. (1) A qualified participant, former qualified
participant, health benefit dependent, or refund beneficiary may
request a hearing on a claim involving his or her rights under Tier
2. Upon written request, the department shall provide for a hearing
that shall be conducted pursuant to chapter 4 of the administrative
procedures act of 1969, 1969 PA 306, MCL 24.271 to 24.287. An
individual may be represented by counsel or other authorized agent
at a hearing conducted under this section.
(2) Chapters 2, 3, and 5 of the administrative procedures act
of 1969, 1969 PA 306, MCL 24.224 to 24.264 and 24.291 to 24.292, do
not apply to the establishment, implementation, administration,
operation, investment, or distribution of Tier 2.
Sec. 127. Each qualified participant, former qualified
participant, and refund beneficiary shall direct the investment of
the individual's accumulated employer and employee contributions
and earnings to 1 or more investment choices within available
categories of investment provided by the state treasurer. The
limitations on the percentage of total assets for investments
provided in the public employee retirement system investment act,
1965 PA 314, MCL 38.1132 to 38.1140m, do not apply to Tier 2.
Sec. 128. The administrative expenses of Tier 2 shall be paid
by the qualified participants, former qualified participants, and
refund beneficiaries who have not closed their accounts in a manner
determined by the department.
Sec. 129. A qualified participant shall not participate in any
other public sector retirement benefits plan for simultaneous
service rendered to the same public sector employer. Except as
otherwise provided in this act or by the department, this section
does not prohibit a qualified participant from participating in a
retirement plan established by a public sector employer under the
internal revenue code. For the purposes of this section, public
sector employer includes, but is not limited to, a reporting unit.
Sec. 130. (1) The department shall promptly credit the Tier 2
account of a qualified participant or former qualified participant
who makes an election under section 110 to terminate membership in
Tier 1 with any amount transferred from Tier 1 pursuant to section
111.
(2) Not later than 30 days after receipt of a recomputed
amount, the department shall charge the participant's Tier 2
account for any amount of excess transfers and transfer that amount
to the appropriate reserve in Tier 1. The director may determine
which investment choice or choices within a participant's Tier 2
account will be used for this purpose.
Sec. 131. (1) This section is subject to the vesting
requirements of section 132.
(2) A qualified participant's employer shall contribute to the
qualified participant's Tier 2 account an amount equal to 4% of the
qualified participant's compensation.
(3) A qualified participant may periodically elect to
contribute up to 3% of his or her compensation to his or her Tier 2
account. The qualified participant's employer shall make an
additional contribution to the qualified participant's Tier 2
account in an amount equal to the contribution made by the
qualified participant under this subsection.
(4) A qualified participant may make contributions in addition
to contributions made under subsection (3) to his or her Tier 2
account as permitted by the department and the internal revenue
code. The qualified participant's employer shall not match
contributions made by the qualified participant under this
subsection.
Sec. 132. (1) A qualified participant is immediately 100%
vested in his or her contributions made to Tier 2. A qualified
participant shall vest in the employer contributions made on his or
her behalf to Tier 2 according to the following schedule:
(a) Upon completion of 2 years of service, 50%.
(b) Upon completion of 3 years of service, 75%.
(c) Upon completion of 4 years of service, 100%.
(2) A qualified participant is vested in the health insurance
coverage provided in section 136 if the qualified participant meets
1 of the following requirements:
(a) The qualified participant has completed 10 years of
service as a qualified participant and was not a member, deferred
member, or former nonvested member of Tier 1.
(b) The qualified participant was a member, deferred member,
or former nonvested member of Tier 1 who made an election to
participate in Tier 2 pursuant to section 110, and who has met the
service requirements he or she would have been required to meet in
order to vest in health benefits under section 91.
Sec. 133. A qualified participant who was a member, deferred
member, or former nonvested member of Tier 1 who makes an election
to participate in Tier 2 pursuant to section 110, shall be credited
with the years of service accrued under Tier 1 on the effective
date of participation in Tier 2 for the purpose of meeting the
vesting requirements for benefits under section 132.
Sec. 134. A qualified participant or former qualified
participant may nominate 1 or more individuals as a refund
beneficiary by filing written notice of nomination with the
department. If the qualified participant or former qualified
participant is married at the time of the nomination and the
participant's spouse is not the refund beneficiary for 100% of the
account, the nomination is not effective unless the nomination is
signed by the participant's spouse. However, the department may
waive this requirement if the spouse's signature cannot be obtained
because of extenuating circumstances.
Sec. 135. (1) A qualified participant is eligible to receive
distribution of his or her accumulated balance in Tier 2 upon
becoming a former qualified participant.
(2) Upon the death of a qualified participant or former
qualified participant, the accumulated balance of that deceased
participant is considered to belong to the refund beneficiary, if
any, of that deceased participant. If a valid nomination of refund
beneficiary is not on file with the department, the department, in
a lump sum distribution, shall distribute the accumulated balance
to the legal representative, if any, of the deceased participant
or, if there is no legal representative, to the deceased
participant's estate.
(3) A former qualified participant or refund beneficiary may
elect 1 or a combination of several of the following methods of
distribution of the accumulated balance:
(a) A lump sum distribution to the recipient.
(b) A lump sum direct rollover to another qualified plan, to
the extent allowed by federal law.
(c) Periodic distributions, as authorized by the department.
(d) No current distribution, in which case the accumulated
balance shall remain in Tier 2 until the former qualified
participant or refund beneficiary elects a method or methods of
distribution under subdivisions (a) to (c), to the extent allowed
by federal law.
Sec. 135a. (1) A qualified participant whom the retirement
board finds to have become totally and permanently disabled from
any gainful employment by reason of personal injury or mental or
physical illness while serving as an employee of that reporting
unit shall be granted a supplemental benefit equivalent to the
amount provided for in section 84 as if the former qualified
participant had retired under section 87, which supplemental
benefit shall be offset by the value of the distribution of his or
her accumulated balance upon becoming a former qualified
participant pursuant to section 135.
(2) If a qualified participant dies as a result of injury or
illness arising out of and in the course of the qualified
participant's reporting unit service for which worker's disability
compensation is paid, or a duty disability retirant who is in
receipt of weekly worker's disability compensation on account of
the retirant's reporting unit service dies from the same causes for
which the former qualified participant retired within 36 months
after the former qualified participant's retirement, and in either
case the death or the illness or injury resulting in death is found
by the retirement board to have resulted, without the qualified
participant's or former qualified participant's willful negligence,
from the performance of the qualified participant's or former
qualified participant's reporting unit service, a supplemental
benefit shall be granted equivalent to the amount provided for in
section 84 had the former qualified participant been considered
retired under section 90, which supplemental benefit shall be
offset by the value of the distribution of his or her accumulated
balance upon becoming a former qualified participant pursuant to
section 135.
(3) A qualified participant who has at least 10 years of
credited service whom the retirement board finds to have become
totally and permanently disabled for purposes of employment by his
or her reporting unit by reason of personal injury or mental or
physical illness before termination of reporting unit service and
employment shall be granted a supplemental benefit equivalent to
the amount provided for in section 84 as if the former qualified
participant had retired under section 86, which supplemental
benefit shall be offset by the value of the distribution of his or
her accumulated balance upon becoming a former qualified
participant pursuant to section 135.
(4) If a qualified participant who meets the service
requirements of section 89 dies as a result of injury or illness
that does not arise out of and in the course of the qualified
participant's reporting unit service, a supplemental benefit shall
be granted equivalent to the amount provided for in section 89 had
the former qualified participant been considered retired under
section 89, which supplemental benefit shall be offset by the value
of the distribution of his or her accumulated balance upon becoming
a former qualified participant pursuant to section 135.
(5) A qualified participant, former qualified participant, or
beneficiary of a deceased participant, which participant is
eligible for a disability retirement allowance under this section,
is eligible for health insurance coverage under section 91 in all
respects and under the same terms as a retirant and his or her
beneficiaries under Tier 1.
Sec. 136. (1) A former qualified participant may elect health
insurance benefits in the manner prescribed in this section if he
or she meets both of the following requirements:
(a) The former qualified participant is vested in health
benefits under section 132(2).
(b) The former qualified participant is at least 60 years of
age or has at least 30 years of credited service.
(2) A former qualified participant who is eligible to elect
health insurance coverage under subsection (1) may elect health
insurance coverage in a health benefit plan or plans as authorized
by section 91 or in another plan as provided in subsection (6). A
former qualified participant who is eligible to elect health
insurance coverage under subsection (1) may also elect health
insurance coverage for his or her health benefit dependents, if
any. A surviving health benefit dependent of a deceased former
qualified participant who is eligible to elect health insurance
coverage under subsection (1) may elect health insurance coverage
in the manner prescribed in this section.
(3) Except as otherwise provided in subsection (6), an
individual who elects health insurance coverage under this section
shall become a member of a health insurance coverage group
authorized under section 91.
(4) For a former qualified participant who is eligible to
elect health insurance coverage under subsection (1) and who is
vested in those benefits under section 132(2)(a), and for his or
her health benefit dependents, the retirement system shall pay a
portion of the health insurance premium as calculated under this
subsection on a cash disbursement method. An individual described
in this subsection who elects health insurance coverage under this
section shall pay to the retirement system the remaining portion of
the health insurance coverage premium not paid by the retirement
system under this subsection. The portion of the health insurance
coverage premium paid by the retirement system under this
subsection shall be equal to the product of 3% and the former
qualified participant's years of service, up to 30 years, and shall
not exceed 90% of the payments for health insurance coverage under
section 91.
(5) A former qualified participant who is eligible to elect
health insurance coverage under subsection (1) and who is vested in
those benefits under section 132(2)(b) may elect health insurance
coverage under section 91 for himself or herself and for his or her
health benefit dependents, in all respects and under the same terms
as would a retirant and his or her health insurance dependents
under Tier 1.
(6) A former qualified participant or health benefit dependent
who is eligible to elect health insurance coverage under this
section and who elects health insurance coverage under a different
plan than the plan authorized under section 91 may elect to have an
amount up to the amount of the retirement system's share of the
monthly health insurance premium subsidy provided in this section
paid by the retirement system directly to the other health
insurance plan or to a medical savings account established pursuant
to section 220 of the internal revenue code, to the extent allowed
by law or under the provisions and procedures of Tier 2.
(7) If the department receives notification from the United
States internal revenue service that this section or any portion of
this section will cause the retirement system to be disqualified
for tax purposes under the internal revenue code, then the portion
that will cause the disqualification does not apply.
Sec. 137. (1) The right of a qualified participant or a former
qualified participant, or his or her beneficiaries, to a
distribution described in subsection (1) is subject to forfeiture
pursuant to the public employee retirement benefits forfeiture act,
1994 PA 350, MCL 38.2701 to 38.2705.
(2) The director has the right of setoff to recover
overpayments made under this article and to satisfy any claims
arising from embezzlement or fraud committed by a qualified
participant, former qualified participant, refund beneficiary, or
other person who has a claim to a distribution or any other benefit
from Tier 2.
(3) The director shall correct errors in the records and
actions under this article, and shall seek to recover overpayments
and shall make up underpayments.
Enacting section 1. If any section or part of a section of
this act is for any reason held to be invalid or unconstitutional,
the holding does not affect the validity of the remaining sections
of this act or the act in its entirety.