September 11, 2012, Introduced by Reps. Pscholka, MacMaster, Potvin, Rogers, MacGregor, Nesbitt, Hovey-Wright, Lori, Jenkins, Hughes, Daley, Ananich, Brunner, Liss and LeBlanc and referred to the Committee on Appropriations.
A bill to amend 1992 PA 234, entitled
"The judges retirement act of 1992,"
by amending the title and sections 105, 106, 111, 214, 214a, 217,
305, and 714 (MCL 38.2105, 38.2106, 38.2111, 38.2214, 38.2214a,
38.2217, 38.2305, and 38.2664), the title and sections 214, 217,
305, and 714 as amended by 2002 PA 95, section 105 as amended by
2008 PA 514, section 106 as amended by 1995 PA 193, and section
214a as added by 1999 PA 215, and by adding sections 214b, 309, and
310.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An act to establish a judges retirement system; to provide for
the administration and maintenance of the retirement system; to
create a retirement board; to prescribe the powers and duties of
the retirement board; to establish certain reserves for the
retirement system; to establish certain funds; to prescribe the
powers and duties of certain state departments and certain state
and local officials and employees; to provide for certain
disqualifications; to make appropriations; to prescribe penalties
and provide remedies; and to repeal acts and parts of acts.
Sec. 105. (1) Beginning January 1, 2002, except as otherwise
provided in this subsection, "eligible retirement plan" means 1 or
more of the following:
(a) An individual retirement account described in section
408(a) of the internal revenue code, 26 USC 408.
(b) An individual retirement annuity described in section
408(b) of the internal revenue code, 26 USC 408.
(c) An annuity plan described in section 403(a) of the
internal revenue code, 26 USC 403.
(d) A qualified trust described in section 401(a) of the
internal revenue code, 26 USC 401.
(e) An annuity contract described in section 403(b) of the
internal revenue code, 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, political
subdivision of a state, or an agency or instrumentality of a state
or political subdivision of a state and that separately accounts
for
amounts transferred into such the
eligible plan under section
457(b) of the internal revenue code, 26 USC 457, from this
retirement system, that accepts the distributee's eligible rollover
distribution.
(g) Beginning January 1, 2008, 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, 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, 26
USC 401.
(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) "Executive secretary" means the executive secretary of the
retirement system as provided in section 205.
(4) Except as otherwise provided in this subsection, "final
compensation" means the annual rate of compensation for the
calendar year of retirement. For a member who retires on January 1,
final compensation means the annual rate of compensation for the
calendar year immediately preceding the date of retirement. Final
compensation does not include an amount that exceeds the maximum
salary set forth for that particular member or vested former member
in the revised judicature act, if applicable. For a member who is a
judge and who performs judicial duties for a limited period or a
specific assignment as authorized by the supreme court pursuant to
section 23 of article VI of the state constitution of 1963, final
compensation means the annual rate of compensation the member was
being paid at the termination of his or her tenure in office as an
elected judge.
(5) "Former elected official" means a member who held a state
elective office before membership in this retirement system, the
former judges retirement system, or the former probate judges
retirement system.
(6) "Former judges retirement system" means the state of
Michigan judges' retirement system created by former 1951 PA 198.
(7) "Former probate judges retirement system" means the state
of Michigan probate judges retirement system created by former 1954
PA 165.
(8) "Funding account" means that term as defined in section 2
of the public employee retirement health care funding act, 2010 PA
77, MCL 38.2732.
(9) "Health reimbursement account" means that term as defined
in section 2 of the public employee retirement health care funding
act, 2010 PA 77, MCL 38.2732.
(10) "Health reimbursement account dependent" means that term
as defined in section 2 of the public employee retirement health
care funding act, 2010 PA 77, MCL 38.2732.
(11) "HRA effective date" means the date specified by the
retirement board that is not later than 1 year following the
effective date of the amendatory act that added this subsection and
not sooner than the date that the department certifies that the
administrative and operational components for the health
reimbursement accounts have been completed.
(12) "HRA member" means a participating member as that term is
defined in section 2a of the public employee retirement health care
funding act, 2010 PA 77, MCL 38.2732a. An HRA member does not
include any plan 1 member or any plan 2 member under this act.
Sec. 106. (1) "Interest" means the rate or rates of interest
per annum, compounded annually, as determined by the retirement
board.
(2) "Internal revenue code" means the United States internal
revenue code of 1986.
(3)
"Judge" means a duly an
elected or appointed justice of
the supreme court, judge of the court of appeals, judge of the
circuit court, judge of the district court, judge of the probate
court, or judge of the recorder's court of the city of Detroit.
(4) "Mandatory contributions" means that term as defined in
section 2a of the public employee retirement health care funding
act, 2010 PA 77, MCL 38.2732a.
(5) (4)
"Medical adviser" means
the medical adviser of the
retirement system as provided in section 205.
(6) "Medical expense" means that term as defined in section
2a of the public employee retirement health care funding act, 2010
PA 77, MCL 38.2732a.
(7) (5)
"Member" means a judge or
state official who is
included in the membership of the retirement system as provided in
section 401.
(8) (6)
"Membership service"
means service performed as a
member under this act or under the former judges retirement system
or former probate judges retirement system.
Sec. 111. (1) "Vested former member" means a member who is
entitled to a deferred vested service retirement allowance under
section 502.
(2) "Voluntary contributions" means that term as defined in
section 2b of the public employee retirement health care funding
act, 2010 PA 77, MCL 38.2732b.
Sec.
214. (1) The reserve for health benefits is created. The
Until the effective date of the amendatory act that added
subsection (2), the retirement system shall deposit into the
reserve for health benefits the member contributions for health
benefits required by section 305(1)(a), amounts transferred
pursuant to section 217(1), and accumulated earnings on these
amounts and contributions. The retirement system shall disburse
from the reserve for health benefits the premiums for hospital and
medical-surgical and sick care benefits as required by sections 509
and 719 before making any disbursement from the funding account.
(2) On and after the effective date of the amendatory act that
added this subsection, the retirement system shall deposit into the
funding account the member contributions for health benefits
required by section 305(1)(a), amounts transferred pursuant to
section 217(1), and qualified participant contributions required by
section 714(6).
Sec. 214a. (1) Following the date of the determination
described in subsection (11) and following the date of the election
made under subsection (4), the retirement system shall provide
postretirement medical benefits for eligible judges and their
health benefit dependents and postdeath medical benefits for health
benefit dependents who survive a deceased contributor. Medical
benefits shall be provided from a separate account established
under the retirement system pursuant to section 401(h) of the
United
States internal revenue code, 26 USC 401.
(2) A separate account, designated as the "medical benefit
account", shall be maintained within the reserve for health
benefits. The assets of the retirement system in excess of the
amounts then credited to the medical benefit account shall not be
used for providing medical benefits under this section. Except as
otherwise provided in this section, the assets of the retirement
system attributable to amounts then credited to the medical benefit
account shall not be used or diverted for any purpose other than
providing medical benefits.
(3) A separate account, designated as the "medical benefit
administrative account", shall be maintained within the reserve for
health benefits. Administrative costs of maintaining the medical
benefit account shall be paid out of the medical benefit
administrative account. Eligible judges making contributions to the
medical benefit account consent as a condition of participation
that transfers may be made from the subaccounts of each contributor
to the medical benefit administrative account equal to no more than
25% of the earnings of funds on account in their respective
subaccounts.
(4) Upon becoming a member of Tier 1 or a qualified
participant in Tier 2, and at such other times as the department
shall permit, an eligible judge may elect to become a contributor
and make contributions to the medical benefit account in an amount
not to exceed the maximum contribution then permitted under
subsection (5). Each eligible judge who is a member of Tier 1 or a
qualified participant in Tier 2 may elect to make contributions to
the medical benefit account during an election period of not less
than 90 days as determined by the retirement system. Within the
medical benefit account, the department shall maintain a subaccount
for each contributor that reflects all contributions made by or for
that contributor, adjusted for investment experience and payment of
medical benefits. The employer of the contributor shall pick up the
contributor's contributions in whole or in part and may require
that its contributions be derived from a reduction in the
contributor's cash salary. If the contributor's contributions are
picked up by the employer on a salary-reduction basis, the
contributor's election shall be irrevocable to the extent required
by
section 401(h) of the United States internal revenue code, 26
USC 401. Contributions picked up under this subsection on a salary-
reduction basis are not included as gross taxable income of the
contributor. The value of medical benefits provided from a
contributor's subaccount shall not be included in the income of the
retired contributor or the contributor's health benefit dependents.
(5) The benefits to be provided from the medical benefit
account, together with life insurance, if any, provided under the
retirement system, are intended to be subordinate to retirement
benefits under the retirement system. Accordingly, contributions in
calendar years after 1999 credited to a contributor's subaccount,
together with contributions, if any, that may be made to provide
life insurance for the contributor under the retirement system,
shall not exceed an aggregate amount equal to 1/3 of the
contributions, including employee contributions, made for those
years to provide a retirement allowance for the contributor under
Tier 1 or Tier 2 of the retirement system. For purposes of applying
a limitation established by this subsection, the retirement system
may rely on an actuarial certification prepared by the actuary,
demonstrating compliance, and reasonable actuarial assumptions
selected by the actuary shall apply for purposes of determining the
aggregate contributions for retirement allowances to be determined
under this subsection. The retirement system shall determine the
method, timing, and limits applicable to all contributors. In no
case shall a determination made by the retirement system exceed the
maximum provided by this subsection.
(6) All payments or reimbursements of medical benefits shall
be charged against the balance of the retired contributor's
subaccount. Payments or reimbursements shall not be made after the
subaccount has been exhausted. Payment or reimbursement of
premiums, charges, and expenses under this subsection shall be made
only upon presentation of proper documentary evidence of amounts,
dates of coverage or service, recipient of coverage or service, and
such other information as the department requires. Medical benefits
to be provided from the medical benefit account shall consist of
any of the following as applicable:
(a) Payment of premiums for the retired contributor and the
contributor's health benefit dependents under the state health
plan, the state dental plan, and the state vision plan if the
contributor and dependents are enrolled in any of those plans.
(b) Payment or reimbursement of premiums or other charges for
coverage of the retired contributor and the contributor's health
benefit dependents under any group health plan within the meaning
of
section 5000(b)(1) of the United States internal revenue code,
26 USC 5000.
(c) Payment or reimbursement of premiums or other charges to
obtain health insurance coverage within the meaning of section
9832(b)(1)
of the United States internal revenue code, 26 USC 9832,
for the retired contributor and the contributor's health benefit
dependents.
(d) Payment or reimbursement of expenses paid or incurred for
the
medical care, as defined in section 213(d)(1) of the United
States
internal revenue code, 26 USC 213, of
the retired
contributor and the contributor's health benefit dependents.
Payment
or reimbursement of premiums, charges, and expenses
shall
be made only upon presentation of proper documentary evidence
of
amounts, dates of coverage or service, recipient of coverage or
service,
and such other information as the department shall
require.
(7) While a contributor or retired contributor remains alive,
the department shall comply with the contributor's written
directions in regard to the type of medical benefits to be provided
under this subsection and the allocation of the medical benefits
among the retired contributor and the contributor's health benefit
dependents if the directions comply with this subsection and the
requirements of the department in regard to the form and content of
the written directions. The department shall also afford each
contributor the opportunity to give written directions in regard to
the allocation of medical benefits to and among some or all of the
contributor's surviving health benefit dependents following the
contributor's death as designated on a beneficiary form developed
by the retirement system. Upon death of the contributor and while
funds remain in the contributor's subaccount, the department shall
observe the written directions in allocating medical benefits among
the contributor's surviving health benefit dependents, while giving
the dependents or their legal representatives a reasonable
opportunity to select the type of medical benefits to be provided.
In the absence of valid written directions from the contributor in
regard to the allocation of medical benefits following the
contributor's death, the department shall allocate funds remaining
in the contributor's subaccount to provide medical benefits to the
contributor's surviving health benefit dependents, until all funds
have been expended.
(8) If there is a balance remaining in the subaccount of a
contributor or retired contributor following the deaths of the
contributor and all of the contributor's health benefit dependents,
then that balance shall be forfeited and distributed to the medical
benefit administrative account.
(9) As used in this section:
(a) "Contributor" means an eligible judge who has elected to
make contributions to the medical benefit account created under
this section.
(b) "Eligible judge" means a judge of the circuit court, the
district court, or the probate court.
(c) "Former member" means an individual who was a member and
who terminates employment upon which his or her membership is based
for any reason.
(d) "Retired contributor" means a contributor who becomes a
former qualified participant and attains the benefit commencement
age as described in section 702, or who becomes a former member who
either attains age 60 or meets the membership requirements for a
retirement allowance under section 501(1).
(10) Contributions shall not be picked up by this state
pursuant to this section until the department receives notification
from the United States internal revenue service that such
contributions will not be included as gross income of the
contributor.
(11) This section does not apply until the department receives
notification from the United States internal revenue service that
the establishment of the medical benefit account under this section
does not cause the retirement system to be disqualified for tax
purposes.
(12) A judge who is eligible to elect to make contributions to
a medical benefit account created under this section may instead
elect to make contributions to a health reimbursement account.
Sec. 214b. (1) All employer contributions, mandatory
contributions, and voluntary contributions shall be contributed or
credited to an HRA member's health reimbursement account as
provided in the public employee retirement health care funding act,
2010 PA 77, MCL 38.2731 to 38.2747.
(2) The retirement board is authorized to establish an
administrative and investment fee structure to be charged against
the health reimbursement accounts to defray the costs of
administering the health reimbursement accounts.
Sec. 217. (1) A court fee fund is created in the state
treasury. The state treasurer shall deposit into the court fee fund
all money received from the executive secretary pursuant to section
304(4). The state treasurer shall, if funds remain in the court fee
fund after the transfer described in subsection (3), transmit a
portion of the money in the court fee fund, not exceeding
$2,200,000.00 in any fiscal year, to the court equity fund created
by
section 151b of the revised judicature act, of 1961, 1961 PA
236,
MCL 600.151b. If the court fee fund exceeds $2,200,000.00 in
any fiscal year and $2,200,000.00 is transmitted to the court
equity fund, an amount may be appropriated from the court fee fund
for operational expenses of trial courts. Operational expenses may
include the payment of salaries of trial court judges other than
judges of the district court. Any money remaining in the court fee
fund at the end of the fiscal year shall remain in the court fee
fund and shall not revert to the general fund.
(2) Notwithstanding any other provision of this act, if the
retirement board establishes an arrangement and fund described in
section
6 of the public employee retirement benefit preservation
protection act, 2002 PA 100, MCL 38.1686, the benefits that are
required to be paid from that fund shall, to the extent permitted
by applicable law, be paid from a portion of the money in the court
fee fund and any earnings on those amounts or other eligible funds.
The retirement board shall determine the amount of the employer
contributions or other eligible funds that shall be allocated to
that fund and deposit that amount in that fund.
(3) The state treasurer shall, if funds remain in the court
fee fund after the transfer described in subsection (2), transmit a
portion of the money in the court fee fund and any earnings on
those
amounts to the reserve for health benefits created by section
214
funding account to pay expected health care costs for the
subsequent fiscal year that are not covered as a result of employee
contributions under sections 305(1) and 714(6), and to pay, in an
amount not to exceed $100,000.00 in each fiscal year, any health
care costs not paid from the reserve for health benefits since
fiscal year 1996-1997.
(4) This section applies unless the department receives
notification from the United States internal revenue service that
this section will cause the retirement system to be disqualified
for tax purposes under the internal revenue code.
Sec. 305. (1) Each member, upon taking office and so long as
he or she remains in office, shall make contributions to the
retirement system according to the applicable plan member
classification as follows:
(a) A plan 1 member or a plan 2 member shall contribute 5% of
the member's compensation. From this contribution, the retirement
system shall deposit an amount equal to 2.0% of the member's
compensation
into the reserve for health benefits for hospital and
medical-surgical
and sick care benefits as provided in section 509
funding account.
(b) A plan 3a member, a plan 3b member, or a plan 5 member
shall contribute 3.5% of the member's compensation.
(c) A plan 3c member, a plan 4 member, a plan 6 member, or a
plan 7 member shall contribute 7% of the member's compensation.
However, a plan 6 member shall not contribute more than $980.00
annually.
(2) The retirement board shall determine the manner in which
member contributions are paid. Except as otherwise provided in this
section, the retirement system shall credit member contributions
when received to the reserve for member contributions.
(3) Upon written notice from the executive secretary to the
state court administrator, the state treasurer shall withhold
payment of the amount due from the salary standardization payment
payable to a county or district control unit for member
contributions that are not received by the retirement system within
60 days after the due date.
Sec. 309. (1) If an HRA member has an amount of salary reduced
for contribution to a health reimbursement account, the deduction
together with any other contributions under this section shall
promptly be credited to that HRA member's health reimbursement
account.
(2) Beginning on the HRA effective date, a member or qualified
participant shall make a mandatory contribution equal to 2% of the
member's or qualified participant's compensation to his or her
health reimbursement account. This subsection does not apply to a
member or qualified participant who first becomes a member or
qualified participant before the effective date of this section and
who is covered by a local health benefit plan for retirees.
(3) An HRA member may also make voluntary contributions to the
health reimbursement account in the manner prescribed in section 10
of the public employee retirement health care funding act, 2010 PA
77, MCL 38.2740.
(4) The employer of an HRA member may contribute an additional
amount to the HRA member's health reimbursement account as
determined by the employer.
(5) This section does not apply to plan 1 members or plan 2
members.
Sec. 310. Except for medical expense to be reimbursed from
amounts within a health reimbursement account, the amendatory act
that added this section does not define or otherwise grant any
right or privilege to health care benefits or other postemployment
benefits to any person other than those health care benefits or
other postemployment benefits, rights, or privileges previously or
already granted to members and qualified participants and their
dependents by this act. The amendatory act that added this section
does not assure or deny to any existing or future employee, HRA
member, any of their health reimbursement account dependents, or
any other person any right of entitlement to any health care
benefit or other postemployment benefit or limit or otherwise
restrict the ability of this state or any employer to modify or
eliminate any existing or future health care benefit or other
postemployment benefit.
Sec. 714. (1) This section is subject to the vesting
requirements of section 715.
(2) A qualified participant's employer shall contribute to the
qualified participant's account in Tier 2 an amount equal to 4% of
the qualified participant's salary.
(3) A qualified participant may periodically elect to
contribute up to 3% of his or her salary 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 state treasurer and the internal
revenue code. The qualified participant's employer shall not match
contributions made by the qualified participant under this
subsection.
(5) A qualified participant who makes a written election under
section 701a may elect to contribute up to 6% of his or her salary
to his or her Tier 2 account. In lieu of employer contributions
under subsection (3), 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. This subsection
applies for a period as determined by the department that equals
the time in which a Tier 1 member was not able to make
contributions to the Tier 2 plan because of the temporary
restraining order issued in the case of Michigan judges assn v
Treasurer of the State of Michigan, case no. 98-DT-72771-CV (Ed
Mi).
(6) Beginning January 1, 2002 and ending on the day before the
effective date of the amendatory act that added section 309, each
qualified participant who is a plan 1 member or a plan 2 member,
upon taking office and so long as he or she remains in office,
shall contribute 2.0% of the qualified participant's compensation
to
the retirement system. The Until
the day before the effective
date of the amendatory act that added section 309, the retirement
system shall deposit the contribution under this subsection into
the reserve for health benefits for hospital and medical-surgical
and sick care benefits as provided in section 719. Beginning on the
effective date of the amendatory act that added section 309, each
qualified participant who is a plan 1 member or plan 2 member, upon
taking office and so long as he or she remains in office, shall
contribute 2.0% of the qualified participant's compensation to the
funding account.