Bill Text: MI SB0408 | 2011-2012 | 96th Legislature | Introduced

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Bill Title: Retirement; state employees; option to remain in Tier 1 defined benefit system and make contributions; provide to current members and provide for health reimbursement account transfers in lieu of health coverage premiums for Tier 2 defined contribution participants. Amends secs. 1b, 20, 27, 35, 38, 47, 48, 49, 50, 55, 64, 65, 67a, 68 & 68c of 1943 PA 240 (MCL 38.1b et seq.) & adds secs. 20j, 35a, 50a, 68b & 68e. TIE BAR WITH: SB 0407'11

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2011-06-07 - Referred To Committee On Appropriations [SB0408 Detail]

Download: Michigan-2011-SB0408-Introduced.html

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SENATE BILL No. 408

 

 

June 7, 2011, Introduced by Senator KAHN and referred to the Committee on Appropriations.

 

 

 

     A bill to amend 1943 PA 240, entitled

 

"State employees' retirement act,"

 

by amending sections 1b, 20, 27, 35, 38, 47, 48, 49, 50, 55, 64,

 

65, 67a, 68, and 68c (MCL 38.1b, 38.20, 38.27, 38.35, 38.38, 38.47,

 

38.48, 38.49, 38.50, 38.55, 38.64, 38.65, 38.67a, 38.68, and

 

38.68c), sections 1b, 20, and 48 as amended by 2002 PA 93, sections

 

27 and 67a as amended by 2004 PA 109, section 35 as added and

 

sections 38, 68, and 68c as amended by 2010 PA 185, section 47 as

 

amended by 2002 PA 743, section 49 as amended by 2008 PA 353,

 

sections 50 and 65 as added by 1996 PA 487, section 55 as amended

 

by 2010 PA 256, and section 64 as amended by 2004 PA 33, and by

 

adding sections 20j, 35a, 50a, 68b, and 68e.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 1b. (1) "Beneficiary" or "disability beneficiary" means a

 

person other than a retirant who receives a retirement allowance,

 

pension, or other benefit provided by this act.

 

     (2) "Compensation" means the remuneration paid a member on

 

account of the member's services rendered to this state. If a

 

member's remuneration is not paid totally in money, the retirement

 

board shall employ the maintenance-compensation schedules

 

established from time to time by the civil service commission.

 

Compensation does not include any of the following:

 

     (a) Remuneration paid in lieu of accumulated sick leave.

 

     (b) Remuneration for services rendered after October 1, 1981,

 

payable at retirement or termination under voluntary or involuntary

 

pay reduction plan B, in excess of the amount the member would have

 

received had the member been compensated for those services at the

 

rate of pay in effect at the time those services were performed.

 

     (c) Payment for accrued annual leave at separation in excess

 

of 240 hours.

 

     (d) Remuneration received by an employee of the department

 

formerly known as the department of mental health resulting from

 

severance pay received because of the deinstitutionalization of the

 

department formerly known as the department of mental health

 

resident population.

 

     (e) Remuneration received as a bonus by investment managers of

 

the department of treasury under the treasury incentive bonus plan

 

first approved by the civil service commission on February 11,

 

1988, pursuant to section 5 of article XI of the state constitution

 

of 1963.

 

     (f) Remuneration received as a bonus or merit payment by

 

assistant attorneys general in the department of attorney general

 

under the merit pay plan approved by the civil service commission

 

on January 19, 1990, pursuant to section 5 of article XI of the

 

state constitution of 1963.

 

     (g) Payment for overtime services rendered on or after October

 

1, 2011.

 

     (3) "Conservation officer" means an employee of the department

 

of natural resources, or its predecessor or successor agency, who

 

has sworn to the prescribed oath of office and who is designated as

 

a peace officer under section 1606 of part 16 of the natural

 

resources and environmental protection act, 1994 PA 451, MCL

 

324.1606, and section 1 of 1986 PA 109, MCL 300.21.

 

     (4) "Credited service" means the sum of the prior service and

 

membership service credited to a member's service account.

 

     Sec. 20. (1) Upon Subject to section 20j, upon his or her

 

retirement, as provided for in section 19, 19a, 19b, 19c, or 19d,

 

or 19e, a member shall receive a retirement allowance equal to the

 

member's number of years and fraction of a year of credited service

 

multiplied by 1-1/2% of his or her final average compensation. The

 

member's retirement allowance is subject to subsection (3). Upon

 

his or her retirement, the member may elect an option provided for

 

in section 31(1).

 

     (2) Pursuant to rules promulgated by the retirement board, a

 

member who retires before becoming 65 years of age may elect to

 

have his or her regular retirement allowance equated on an

 

actuarial basis to provide an increased retirement allowance

 

payable up to his or her attainment of 65 years of age and a

 

reduced retirement allowance payable after his or her attainment of

 

65 years of age. His or her increased retirement allowance payable

 

up to age 65 shall approximately equal the sum of his or her

 

reduced retirement allowance payable after age 65 and his or her

 

estimated social security primary insurance amount. In addition,

 

upon retirement the member may elect an option provided for in

 

section 31(1).

 

     (3) If a retirant dies before receiving payment of his or her

 

retirement allowance in an aggregate amount equal to the retirant's

 

accumulated contributions credited to the retirant in the

 

employees' savings fund at the time of his or her retirement, the

 

difference between his or her accumulated contributions and the

 

amount of retirement allowance received by him or her shall be paid

 

to the person or persons that he or she nominated by written

 

designation executed and filed with the retirement board. If the

 

person or persons do not survive the retirant, then the difference,

 

if any, shall be paid to the retirant's legal representative or

 

estate. Benefits shall not be paid under this subsection on account

 

of the death of the retirant if he or she elected an option

 

provided for in section 31(1).

 

     (4) If a member has 10 or more years of credited service, or

 

has 5 or more years of credited service as an elected officer or in

 

a position in the executive branch or the legislative branch

 

excepted or exempt from the classified state civil service as

 

provided in section 5 of article XI of the state constitution of

 

1963, and is separated from the service of the state for a reason

 

other than retirement or death, he or she shall remain a member

 

during the period of absence from the state service for the

 

exclusive purpose of receiving a retirement allowance provided for

 

in this section. If a former employee of the state accident fund

 

who had 5 or more years of service as an employee of the state

 

accident fund returns to employment with the state before receiving

 

a retirement allowance under this act, the employee shall be

 

required to accumulate 10 or more years of credited service before

 

receiving a retirement allowance under this act. If a former

 

employee of the Michigan biologic products institute who is

 

eligible to and has elected to purchase additional credited service

 

pursuant to section 17l(2) returns to employment with the state

 

before receiving a retirement allowance under this act, the

 

employee shall be required to accumulate 10 or more years of

 

credited service, without regard to the additional credited service

 

purchased pursuant to section 17l(2) but including any credited

 

service authorized under section 16, before receiving a retirement

 

allowance under this act. If the member withdraws all or part of

 

his or her accumulated contributions, he or she ceases to be a

 

member. Upon becoming 60 years of age or older, the member may

 

retire upon his or her written application to the retirement board

 

as provided in section 19(1). If a member elects an option as

 

provided under section 31(4), but dies before the effective date of

 

his or her retirement, the option elected by the member shall be

 

carried out, and the beneficiary of the member is entitled to all

 

advantages due under that option.

 

     (5) A person who is a member after January 1, 1981, who has at

 

least 5 years of credited service, and whose employment with the

 

department formerly known as the department of mental health is

 

terminated by reason of reduction in force related to

 

deinstitutionalization that may or may not result in facility

 

closure, shall remain a member during the period of absence from

 

the state service for the exclusive purpose of receiving a service

 

retirement allowance as provided in this subsection. As used in

 

this subsection, "deinstitutionalization" means planned reduction

 

of state center or hospital beds through placement of individuals

 

from the hospital or facility, or through limiting admissions to

 

centers and hospitals, or both. If a member withdraws all or part

 

of the member's accumulated contributions, the member ceases to be

 

a member. Upon becoming 60 years of age or older, the member may

 

retire upon written application to the retirement board. The

 

application shall specify a date on which the member desires to

 

retire. Upon retirement, the member shall receive a retirement

 

allowance equal to the number of years and fraction of a year of

 

credited state service multiplied by 1-1/2% of the member's final

 

average compensation. Upon retirement, the member may elect an

 

option provided in section 31(1). If the member elects an option

 

provided for in section 31(4), but dies before the effective date

 

of retirement, the option elected by the member shall be carried

 

out, and a beneficiary of the member is entitled to all advantages

 

due under the option.

 

     (6) A retirant or the beneficiary of a retirant who retired

 

before July 1, 1974 shall have his or her retirement allowance

 

recalculated based on the retirant's number of years and fraction

 

of a year of credited service multiplied by 1.5% of his or her

 

final average compensation. The retirant or beneficiary is eligible

 

to receive the recalculated retirement allowance beginning October

 

1, 1987, but is not eligible to receive the adjusted amount

 

attributable to any month beginning before October 1, 1987. The

 

recalculated retirement allowance provided by this subsection shall

 

be paid by January 1, 1988 and shall be the basis on which future

 

adjustments to the allowance, including the supplement provided by

 

section 20h, are calculated. The retirement allowance of a retirant

 

who dies before January 1, 1988, and who did not nominate a

 

retirement allowance beneficiary pursuant to section 31, shall not

 

be recalculated pursuant to this subsection.

 

     (7) Each retirement allowance payable under this act shall

 

date from the first of the month following the month in which the

 

applicant satisfies the age and service or other requirements for

 

receiving the retirement allowance and terminates state service. A

 

full month's retirement allowance is payable for the month in which

 

a retirement allowance ceases.

 

     (8) An employee of the state accident fund who has 5 or more

 

but less than 10 years of credited service as of the effective date

 

of the transfer authorized by section 701a of the worker's

 

disability compensation act of 1969, 1969 PA 317, MCL 418.701a, and

 

who is permitted to receive a retirement allowance under subsection

 

(4) is eligible for health care benefits under section 20d on the

 

date of his or her retirement to the same extent as a member with

 

10 years of credited service who vested on the same date.

 

     (9) An employee of the Michigan biologic products institute

 

who has 5 or more but less than 10 years of credited service as of

 

the effective date of the conveyance authorized by the Michigan

 

biologic products institute transfer act, 1996 PA 522, MCL

 

333.26331 to 333.26340, and who is permitted to receive a

 

retirement allowance under subsection (4) is eligible for health

 

care benefits under section 20d on the date of his or her

 

retirement to the same extent as a member with 10 years of credited

 

service who vested on the same date.

 

     Sec. 20j. (1) Beginning October 1, 2011, the calculation of a

 

retirement allowance under this act for a member who did not make

 

the election under section 50a shall include only the following

 

items of credited service, as applicable:

 

     (a) The years and fraction of a year of credited service

 

accrued to that member before October 1, 2011.

 

     (b) Credit for years of service under section 49(10).

 

     (c) Service credit that was purchased before October 1, 2011.

 

     (d) Service credit that is purchased under a payment plan

 

pursuant to this act that was in effect as of September 30, 2011.

 

     (2) Beginning October 1, 2011, the calculation of a retirement

 

allowance under this act for a member who did not make the election

 

under section 50a shall include only the following items of

 

compensation:

 

     (a) Compensation received by the member before October 1,

 

2011.

 

     (b) Up to 240 hours of accrued annual leave paid at separation

 

multiplied by the hourly rate of pay for the member as of September

 

30, 2011, which for purposes of final average compensation shall be

 

treated as being paid on September 30, 2011.

 

     (3) Beginning on October 1, 2011, a member who did not make

 

the election under section 50a shall continue to accumulate years

 

of service credit after becoming a qualified participant in Tier 2

 

only as necessary for the purpose of vesting in a retirement

 

allowance and to determine when a retirement allowance under Tier 1

 

may begin under this act, except as otherwise provided in section

 

50a(7).

 

     (4) A member who did not make the election under section 50a

 

shall continue to be treated as a member for purposes of Tier 1,

 

except as otherwise provided in section 50a(7) and except for the

 

limitations on credited service and compensation as provided in

 

subsections (1) and (2).

 

     (5) Beginning October 1, 2011, the calculation of a retirement

 

allowance under this act for a member who makes the election under

 

section 50a(1) and the designation under section 50a(2) shall

 

include only the following items of credited service, as

 

applicable:

 

     (a) The years and fraction of a year of credited service

 

accrued to that member on or before the attainment date.

 

     (b) Credit for years of service under section 49(10).

 

     (c) Service credit that was purchased on or before the

 

attainment date.

 

     (d) Service credit that is purchased under a payment plan

 

pursuant to this act that was in effect as of the attainment date.

 

     (6) Beginning October 1, 2011, the calculation of a retirement

 

allowance under this act for a member who makes the election under

 

section 50a(1) and the designation under section 50a(2) shall

 

include only the following items of compensation:

 

     (a) Compensation received by the member on or before the

 

attainment date.

 

     (b) Up to 240 hours of accrued annual leave paid at separation

 

multiplied by the hourly rate of pay for the member as of the

 

attainment date, which for purposes of final average compensation

 

shall be treated as being paid on the attainment date.

 

     (7) Beginning on October 1, 2011, a member who makes the

 

election under section 50a(1) and the designation under section

 

50a(2) shall continue to accumulate years of service credit after

 

becoming a qualified participant in Tier 2 only as necessary to

 

determine when a retirement allowance under Tier 1 may begin under

 

this act, except as otherwise provided in section 50a(7).

 

     (8) A member who makes the election under section 50a(1) and

 

the designation under section 50a(2) shall continue to be treated

 

as a member for purposes of Tier 1, except as otherwise provided in

 

section 50a(7) and except for the limitations on credited service

 

and compensation as provided in subsections (5) and (6).

 

     (9) As used in this section, "attainment date" means the date

 

the member attains 30 years of credited service or the date the

 

member terminates employment, whichever first occurs.

 

     Sec. 27. (1) Except as provided in subsections (3), (4), and

 

(5), if a member dies as a result of a personal injury or disease

 

arising out of and in the course of his or her employment with the

 

state and the personal injury or disease resulting in death is

 

found by the retirement board to have been the sole and exclusive

 

result of employment with the state, the surviving spouse shall

 

receive a retirement allowance calculated as if the deceased member

 

had retired effective the day before the date of death, elected

 

option A under section 31(1), and nominated his or her spouse as

 

retirement allowance beneficiary. The retirement allowance shall be

 

calculated under section 20(1) based upon the amount of the

 

deceased member's credited service. If the deceased member does not

 

have the minimum number of years of credited service needed to vest

 

in the retirement system, the amount of service necessary to reach

 

that amount of credited service shall be granted.

 

     (2) The retirement allowance payable to a surviving spouse

 

under this section shall not be less than $6,000.00 per year. The

 

retirement allowance first payable to a surviving spouse under

 

subsection (1) shall not be more than an amount that, when added to

 

the statutory worker's disability compensation benefits payable to

 

the surviving spouse of the deceased member, equals the deceased

 

member's final compensation.

 

     (3) If the requirements of subsection (1) are met but the

 

deceased member is survived by a spouse and a child or children

 

under 21 years of age, then the retirement allowance calculated

 

under subsections (1) and (2) shall be payable as follows:

 

     (a) One-half to the surviving spouse.

 

     (b) One-half to the surviving child or children under 21 years

 

of age, in equal shares. The retirement allowance payable to a

 

surviving child under this subsection shall terminate upon that

 

child's marriage, death, or becoming 21 years of age, whichever

 

occurs first. That child's share of the terminated retirement

 

allowance shall be redistributed among the remaining children under

 

21 years of age, if any. When there are no surviving children

 

entitled to a share of the retirement allowance under this

 

subsection, the children's share shall revert to the surviving

 

spouse.

 

     (4) If the requirements of subsection (1) are met and the

 

deceased member is not survived by a spouse but is survived by a

 

child or children under 21 years of age, then the retirement

 

allowance calculated under subsections (1) and (2) shall be paid to

 

the surviving child or children in equal shares. The retirement

 

allowance payable to a surviving child under this subsection shall

 

terminate upon that child's marriage, death, or becoming 21 years

 

of age, whichever occurs first. That child's share of the

 

terminated retirement allowance shall be redistributed among the

 

remaining children under 21 years of age, if any.

 

     (5) If the other requirements of subsection (1) are met and

 

neither a surviving spouse nor an eligible child surviving the

 

deceased member or duty disability retirant exists, a monthly

 

allowance shall be paid to 1 surviving dependent parent whom the

 

retirement board finds to be totally and permanently disabled and

 

to have been dependent upon the deceased member or retirant for at

 

least 50% of the parent's financial support. The Subject to section

 

20j, the allowance shall be computed in the same manner as if the

 

deceased member or retirant had retired for reasons of age and

 

service effective the day preceding the member's or retirant's

 

death, elected the option provided in section 31(1)(a), and

 

nominated the surviving parent as retirement allowance beneficiary.

 

The surviving parent's beneficiary retirement allowance shall

 

terminate upon marriage or death.

 

     Sec. 35. (1) Except as otherwise provided in this section,

 

beginning with the first pay date after November 1, 2010 and ending

 

September 30, 2013, each member and each qualified participant

 

shall contribute an amount equal to 3.0% of the member's or

 

qualified participant's compensation to the appropriate funding

 

account established under the public employee retirement health

 

care funding act, 2010 PA 77, MCL 38.2731 to 38.2747. The member

 

and qualified participant contributions shall be deducted by the

 

employer and remitted as employer contributions to the funding

 

account in a manner that the state budget office and the retirement

 

system shall determine. The state budget office and the retirement

 

system shall determine a method of deducting the contributions

 

provided for in this section from the compensation of each member

 

and qualified participant for each payroll and each payroll period.

 

     (2) As used in this act section, "funding account" means the

 

appropriate irrevocable trust created in the public employee

 

retirement health care funding act, 2010 PA 77, MCL 38.2731 to

 

38.2747, for the deposit of funds and the payment of retirement

 

health care benefits.

 

     (3) The department of technology, management, and budget shall

 

ensure, to the maximum extent possible, that payments made under

 

this section shall be applied for any tax credits or tax liability

 

reduction under the health care and education reconciliation act of

 

2010, Public Law 111-152.

 

     (4) On or before October 1, 2011, all contributions under this

 

section shall cease and the state or the retirement system shall

 

refund to members and qualified participants all amounts

 

contributed under this section, including any actual interest

 

earned on those contributions while being held by this state or the

 

retirement system. The state budget director and the retirement

 

system shall determine a method of refunding the contributions and

 

interest provided for in this subsection to each member and

 

qualified participant.

 

     Sec. 35a. (1) Beginning with the first pay date after October

 

1, 2011 and ending upon the member's termination of employment or

 

attainment date, as applicable under section 50a, each member who

 

made the election under section 50a shall contribute an amount

 

equal to 4% of his or her compensation to the employees' savings

 

fund to provide for the amount of retirement allowance that is

 

calculated only on the credited service and compensation received

 

by that member after September 30, 2011. The member shall not

 

contribute any amount under this subsection for any years of

 

credited service accrued or compensation received before October 1,

 

2011.

 

     (2) The retirement system and state budget director shall

 

determine a method of deducting the contributions provided for in

 

this section from the compensation of each member for each payroll

 

and each payroll period.

 

     (3) The state shall pick up the member contributions required

 

by subsection (1) for all compensation received on or after October

 

1, 2011. Contributions picked up shall be treated as employer

 

contributions in determining tax treatment under the internal

 

revenue code. The state shall pay these member contributions from

 

the same source of funds that is used in paying compensation to the

 

member.

 

     (4) A member is entitled to the benefit of all contributions

 

made under this section in the same manner as provided under

 

section 11(2).

 

     Sec. 38. (1) The annual level percent of payroll contribution

 

rate to finance the benefits provided under this act shall be

 

determined by actuarial valuation pursuant to subsections (2) and

 

(3), upon the basis of the risk assumptions adopted by the

 

retirement board with approval of the department of technology,

 

management, and budget, and in consultation with the investment

 

counsel and the actuary. An annual actuarial valuation shall be

 

made of the retirement system in order to determine the actuarial

 

condition of the retirement system and the required contribution to

 

the retirement system. The actuary shall report to the legislature

 

by April 15 of each year on the actuarial condition of the

 

retirement system as of the end of the previous fiscal year and on

 

the projections of state contributions for the next fiscal year.

 

The actuary shall certify in the report that the techniques and

 

methodologies used are generally accepted within the actuarial

 

profession and that the assumptions and cost estimates used fall

 

within the range of reasonable and prudent assumptions and cost

 

estimates. An annual actuarial gain-loss experience study of the

 

retirement system shall be made in order to determine the financial

 

effect of variations of actual retirement system experience from

 

projected experience.

 

     (2) The contribution rate for monthly benefits payable in the

 

event of the death of a member before retirement or the disability

 

of a member shall be computed using an individual projected benefit

 

entry age normal cost method of valuation.

 

     (3) Except as otherwise provided in this subsection, the

 

contribution rate for benefits shall be computed using an

 

individual projected benefit entry age normal cost method of

 

valuation. For the 1995-96 state fiscal year and for each

 

subsequent fiscal year in which the actuarial accrued liability for

 

health benefits is less than 100% funded, the contribution rate for

 

benefits provided under section 20d shall be computed using a cash

 

disbursement method. Beginning in the fiscal year after the fiscal

 

year in which the actuarial accrued liability for health benefits

 

under section 20d is at least 100% funded by the health advance

 

funding subaccount created under section 11(9), and continuing for

 

each subsequent fiscal year, the contribution rate for health

 

benefits provided under section 20d shall be computed using an

 

individual projected benefit entry age normal cost method of

 

valuation. The contribution rate for service that may be rendered

 

in the current year, the normal cost contribution rate, shall be

 

equal to the aggregate amount of individual entry age normal costs

 

divided by 1% of the aggregate amount of active members' valuation

 

compensation. The unfunded actuarial accrued liability shall be

 

equal to the actuarial present value of benefits reduced by the

 

actuarial present value of future normal cost contributions and the

 

actuarial value of assets on the valuation date. Except as

 

otherwise provided in this subsection, the unfunded actuarial

 

accrued liability shall be amortized in accordance with generally

 

accepted governmental accounting standards over a period equal to

 

or less than 40 years, with the payment schedule for the employer

 

being based upon and applied to the combined payrolls of the

 

employees who are members and qualified participants. For the

 

fiscal year that begins on October 1, 2006 only, the contribution

 

for the unfunded actuarial accrued liability shall be equal to 4.5%

 

of the unfunded actuarial accrued liability.

 

     (4) The legislature annually shall appropriate to the

 

retirement system the amount determined pursuant to subsections (2)

 

and (3). The state treasurer shall transfer monthly to the

 

retirement system an amount equal to the product of the

 

contribution rates determined in subsections (2) and (3) times the

 

aggregate amount of active member or qualified participant

 

compensation, as appropriate, paid during that month. Not later

 

than 60 days after the termination of each state fiscal year, the

 

executive secretary of the retirement board shall certify to the

 

director of the department of technology, management, and budget

 

the actual aggregate compensations paid to active members and

 

qualified participants during the preceding state fiscal year. Upon

 

receipt of that certification, the director of the department of

 

technology, management, and budget shall compute the difference, if

 

any, between actual state contributions received during the

 

preceding state fiscal year and the product of the contribution

 

rates determined in subsections (2) and (3) times the aggregate

 

compensations paid to active members or qualified participants, as

 

appropriate, during the preceding state fiscal year. Except as

 

otherwise provided in subsection (5), the difference, if any, shall

 

be submitted in the executive budget to the legislature for

 

appropriation in the next succeeding state fiscal year. This

 

subsection does not apply for those fiscal years in which a deposit

 

occurs pursuant to subsection (6).

 

     (5) For differences occurring in fiscal years beginning on or

 

after October 1, 1991, a minimum of 20% of the difference between

 

the estimated and the actual aggregate compensation and the

 

estimated and the actual contribution rate described in subsection

 

(4), if any, may be submitted in the executive budget to the

 

legislature for appropriation in the next succeeding state fiscal

 

year and a minimum of 25% of the remaining difference shall be

 

submitted in the executive budget to the legislature for

 

appropriation in each of the following 4 state fiscal years, or

 

until 100% of the remaining difference is submitted, whichever

 

first occurs. In addition, interest shall be included for each year

 

that a portion of the remaining difference is carried forward. The

 

interest rate shall equal the actuarially assumed rate of

 

investment return for the state fiscal year in which payment is

 

made. This subsection does not apply for those fiscal years in

 

which a deposit occurs pursuant to subsection (6).

 

     (6) For each fiscal year that begins on or after October 1,

 

2001, if the actuarial valuation prepared pursuant to this section

 

for each fiscal year 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 exceeds the actuarial present value of

 

benefits, the annual level percent of payroll contribution rate as

 

determined pursuant to subsections (1), (2), and (3) may be

 

deposited into the health advance funding subaccount created under

 

section 11(9).

 

     (7) Notwithstanding any other provision of this act, if the

 

retirement board establishes an arrangement and fund as described

 

in section 6 of the public employee retirement benefit protection

 

act, 2002 PA 100, MCL 38.1686, the benefits that are required to be

 

paid from that fund shall be paid from a portion of the employer

 

contributions described in this section 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 before it deposits

 

any remaining employer contributions or other eligible funds in the

 

pension fund.

 

     Sec. 47. (1) Upon retirement as provided in section 46, a

 

supplemental member shall be paid a temporary straight life

 

supplemental early retirement allowance terminating upon the

 

supplemental member reaching age 62 years or his or her death,

 

whichever occurs first. Prior to the effective date of retirement,

 

the supplemental member may choose to be paid his or her retirement

 

allowance under an optional form of payment provided in section

 

31(1)(a). For the purposes of this election, the provisions of

 

section 31(1)(a) are modified to reflect the temporary nature of a

 

supplemental early retirement allowance.

 

     (2) The Subject to section 20j, the amount of the supplemental

 

member's temporary straight life supplemental early retirement

 

allowance is equal to the difference between (i) 2.0% of his or her

 

supplemental final average compensation multiplied by his or her

 

covered service plus 1.5% of the supplemental member's final

 

average compensation multiplied by the excess, if any, of his or

 

her credited service over his or her covered service; and (ii) the

 

amount of retirement allowance paid under section 20.

 

     Sec. 48. (1) A member who is a conservation officer may retire

 

under this section if all of the following requirements are met:

 

     (a) The member is a conservation officer on April 1, 1991.

 

     (b) The member has 25 or more years of credited service, of

 

which 20 years of credited service are as a conservation officer

 

and of which the last 2 years of credited service are as a

 

conservation officer.

 

     (2) A member who is a conservation officer may retire under

 

this section if the member has 25 or more years of credited

 

service, of which 23 years of credited service are as a

 

conservation officer and of which the last 2 years of credited

 

service are as a conservation officer.

 

     (3) A member may retire under subsection (1) or (2) upon

 

written application to the retirement board stating a date upon

 

which he or she desires to retire. Beginning Subject to section

 

20j, beginning on the retirement allowance effective date, he or

 

she shall receive a retirement allowance equal to 60% of the

 

member's annual compensation for the member's most highly

 

compensated 24 consecutive months of service as a conservation

 

officer. The formula for calculating a member's retirement

 

allowance under this subsection shall never exceed the formula for

 

calculating a retirement allowance under section 24 of the state

 

police retirement act of 1986, 1986 PA 182, MCL 38.1624.

 

     (4) A member who is a conservation officer may retire under

 

this section if all of the following requirements are met:

 

     (a) The member is a conservation officer on April 1, 1991.

 

     (b) The member is 50 years of age or older.

 

     (c) The member has 10 years of credited service as a

 

conservation officer and the last 2 years of credited service are

 

as a conservation officer.

 

     (5) A member may retire under subsection (4) upon written

 

application to the retirement board, on or after April 1, 1991, but

 

not later than April 1, 1992, stating a date on which he or she

 

desires to retire. The retirement allowance effective date shall be

 

on or after May 1, 1991 but not later than July 1, 1992. Beginning

 

on the retirement allowance effective date, he or she shall receive

 

a retirement allowance equal to 2% of the member's annual

 

compensation for the member's most highly compensated 24

 

consecutive months of service as a conservation officer times the

 

number of years, including any fraction of a year, of service

 

credited to the member under this act. However, a retirement

 

allowance payable under this subsection shall not exceed 60% of the

 

member's annual compensation for the member's most highly

 

compensated 24 consecutive months of service as a conservation

 

officer.

 

     (6) Before the effective date of the retirement allowance, a

 

member who is a conservation officer and who retires under this

 

section shall elect to receive his or her retirement allowance

 

under a form of payment as provided in section 31(1).

 

     (7) Pursuant to rules promulgated by the retirement board, a

 

member who retires under this section before becoming 65 years old

 

may elect to have his or her regular retirement allowance equated

 

on an actuarial basis to provide an increased retirement allowance

 

payable to age 65 and a reduced retirement allowance payable after

 

becoming 65 years old. The retirant's increased retirement

 

allowance payable to age 65 shall approximately equal the sum of

 

his or her reduced retirement allowance payable after age 65 and

 

his or her estimated social security primary insurance amount.

 

     (8) If a member who retires under this section dies before

 

receiving payment of his or her retirement allowance in an

 

aggregate amount equal to the accumulated contributions standing to

 

the retirant's account in the employees' savings fund at the time

 

of his or her retirement, the difference between his or her

 

accumulated contributions and the amount of the retirement

 

allowance received by him or her shall be paid to the person or

 

persons that the retirant has nominated by written designation duly

 

executed and filed with the retirement board, or, if there is no

 

such designated person or persons surviving, then to the retirant's

 

legal representative or estate.

 

     (9) The director of the department of natural resources, or

 

his or her designee, shall certify to the retirement board that a

 

member who applies to retire under this section is a conservation

 

officer.

 

     (10) This section does not prohibit a member who is a

 

conservation officer and who does not meet the requirements of this

 

section from qualifying for a retirement allowance under any other

 

provision of this act.

 

     Sec. 49. (1) This section is enacted pursuant to section

 

401(a) of the internal revenue code, 26 USC 401, that imposes

 

certain administrative requirements and benefit limitations for

 

qualified governmental plans. This state intends that the

 

retirement system be a qualified pension plan created in trust

 

under section 401 of the internal revenue code, 26 USC 401, and

 

that the trust be an exempt organization under section 501 of the

 

internal revenue code, 26 USC 501. The department shall administer

 

the retirement system to fulfill this intent.

 

     (2) The retirement system shall be administered in compliance

 

with the provisions of section 415 of the internal revenue code, 26

 

USC 415, and regulations under that section that are applicable to

 

governmental plans and beginning January 1, 2010, applicable

 

provisions of the final regulations issued by the internal revenue

 

service on April 5, 2007. Employer-financed benefits provided by

 

the retirement system under this act shall not exceed the

 

applicable limitations set forth in section 415 of the internal

 

revenue code, 26 USC 415, as adjusted by the commissioner of

 

internal revenue under section 415(d) of the internal revenue code,

 

26 USC 415, to reflect cost-of-living increases, and the retirement

 

system shall adjust the benefits, including benefits payable to

 

retirants and retirement allowance beneficiaries, subject to the

 

limitation each calendar year to conform with the adjusted

 

limitation. For purposes of section 415(b) of the internal revenue

 

code, 26 USC 415, the applicable limitation shall apply to

 

aggregated benefits received from all qualified pension plans for

 

which the office of retirement services coordinates administration

 

of that limitation. If there is a conflict between this section and

 

another section of this act, this section prevails.

 

     (3) The assets of the retirement system shall be held in trust

 

and invested for the sole purpose of meeting the legitimate

 

obligations of the retirement system and shall not be used for any

 

other purpose. The assets shall not be used for or diverted to a

 

purpose other than for the exclusive benefit of the members, vested

 

former members, retirants, and retirement allowance beneficiaries

 

before satisfaction of all retirement system liabilities.

 

     (4) The retirement system shall return post-tax member

 

contributions made by a member and received by the retirement

 

system to a member upon retirement, pursuant to internal revenue

 

service regulations and approved internal revenue service exclusion

 

ratio tables.

 

     (5) The required beginning date for retirement allowances and

 

other distributions shall not be later than April 1 of the calendar

 

year following the calendar year in which the employee attains age

 

70-1/2 or April 1 of the calendar year following the calendar year

 

in which the employee retires. The required minimum distribution

 

requirements imposed by section 401(a)(9) of the internal revenue

 

code, 26 USC 401, shall apply to this act and be administered in

 

accordance with a reasonable and good faith interpretation of the

 

required minimum distribution requirements for all years to which

 

the required minimum distribution requirements apply to the

 

retirement system.

 

     (6) If the retirement system is terminated, the interest of

 

the members, vested former members, retirants, and retirement

 

allowance beneficiaries in the retirement system is nonforfeitable

 

to the extent funded as described in section 411(d)(3) of the

 

internal revenue code, 26 USC 411, and related internal revenue

 

service regulations applicable to governmental plans.

 

     (7) Notwithstanding any other provision of this act to the

 

contrary that would limit a distributee's election under this act,

 

a distributee may elect, at the time and in the manner prescribed

 

by the retirement board, to have any portion of an eligible

 

rollover distribution paid directly to an eligible retirement plan

 

specified by the distributee in a direct rollover. This subsection

 

applies to distributions made on or after January 1, 1993.

 

Beginning October 1, 2010, a nonspouse beneficiary may elect to

 

have any portion of an amount payable under this act that is an

 

eligible rollover distribution treated as a direct rollover that

 

will be paid in a direct trustee-to-trustee transfer to an

 

individual retirement account or individual retirement annuity

 

described in section 408(a) or (b) of the internal revenue code, 26

 

USC 408, that is established for the purpose of receiving a

 

distribution on behalf of the beneficiary and that will be treated

 

as an inherited individual retirement account or individual

 

retirement annuity pursuant to section 402(c)(11) of the internal

 

revenue code, 26 USC 402.

 

     (8) For purposes of determining actuarial equivalent

 

retirement allowances under sections 31(1)(a) and (b) and 20(2),

 

the actuarially assumed interest rate shall be 8% with utilization

 

of the 1983 group annuity and mortality table.

 

     (9) Notwithstanding any other provision of this act to the

 

contrary, the compensation of a member of the retirement system

 

shall be taken into account for any year under the retirement

 

system only to the extent that it does not exceed the compensation

 

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

 

code, 26 USC 401, as adjusted by the commissioner of internal

 

revenue. This subsection applies to any person who first becomes a

 

member of the retirement system on or after October 1, 1996.

 

     (10) Notwithstanding any other provision of this act to the

 

contrary, contributions, benefits, and service credit with respect

 

to qualified military service will be provided under the retirement

 

system in accordance with section 414(u) of the internal revenue

 

code, 26 USC 414. This subsection applies to all qualified military

 

service on or after December 12, 1994. Beginning on January 1,

 

2007, in accordance with section 401(a)(37) of the internal revenue

 

code, 26 USC 401, if a member dies while performing qualified

 

military service for purposes of determining death benefits payable

 

under this act, the member shall be treated as having resumed and

 

then terminated employment because of death.

 

     Sec. 50. (1) Except as otherwise provided in subsection (2),

 

the retirement system shall provide an opportunity for each member

 

who is a member on March 30, 1997, 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

 

January 2, 1998 and ending on April 30, 1998. 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 May

 

31, 1998.

 

     (b) Become a qualified participant in Tier 2 effective 12:01

 

a.m., June 1, 1998.

 

     (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 this

 

act effective 12 midnight May 31, 1998. This subdivision does not

 

affect a person's right to health benefits provided under this act

 

pursuant to section 68.

 

     (2) This subsection applies to an individual who was a vested

 

member of Tier 1 on March 30, 1997 and who terminates the

 

employment upon which that membership is based on or after March

 

31, 1997 but on or before May 31, 1998. 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 March 31, 1997 and ending on May 31, 1998. 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 defined 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 68.

 

     (3) If an individual who was a deferred member on March 30,

 

1997 or an individual who was a former nonvested member on March

 

30, 1997 is reemployed before July 1, 2011 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 but no later than August 29, 2011. 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 68.

 

     (4) After consultation with the retirement system's actuary

 

and the retirement board, the department of technology, management,

 

and budget 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, Act No. 46 of the Public Acts of

 

1991, being sections 38.1701 to 38.1711 of the Michigan Compiled

 

Laws.1991 PA 46, MCL 38.1701 to 38.1711.

 

     (6) If an individual who was a deferred member of the public

 

school employees retirement system on March 30, 1997 is first

 

employed and entered upon the payroll of his or her employer on or

 

after March 31, 1997 and before July 1, 2011, 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 state treasurer as if the individual were a deferred

 

member of this retirement system on March 30, 1997.

 

     (7) If the department of technology, management, and budget

 

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.

 

     (8) This section does not apply to a deferred member or former

 

nonvested member under subsection (3) or a deferred member of the

 

public school employees retirement system under subsection (6) on

 

or after July 1, 2011.

 

     Sec. 50a. (1) The retirement system shall provide an

 

opportunity for each member who is a member on June 30, 2011 to

 

make an election with the retirement system to continue to receive

 

credit for any future service and compensation after September 30,

 

2011, for purposes of a calculation of a retirement allowance under

 

this act. A member who makes the election under this section shall

 

make the contributions prescribed in section 35a.

 

     (2) As part of the election under subsection (1), the

 

retirement system shall provide an opportunity for the member to

 

make a designation that the contributions prescribed in section 35a

 

shall be paid only until the member's attainment date. A member who

 

makes the election under subsection (1) and who makes the

 

designation under this subsection shall make the contributions

 

prescribed in section 35a only until the member's attainment date.

 

A member who makes the election under subsection (1) and who does

 

not make the designation or rescinds the designation under this

 

subsection shall make the contributions prescribed in section 35a

 

until termination of employment.

 

     (3) The retirement system shall determine a method of

 

accepting member elections and designations under this section. The

 

retirement system shall accept elections and designations under

 

this section from members during an election period that begins on

 

July 1, 2011 and ends at 5 p.m. eastern daylight time on August 31,

 

2011. A member may rescind an election or designation on or before

 

the close of the election period. An election or designation made

 

by a member and not rescinded on or before the close of the

 

election period shall not be rescinded.

 

     (4) A member who does not make the election under this section

 

or who rescinds an election on or before the close of the election

 

period under this section is subject to all of the following:

 

     (a) He or she ceases to receive credit for any future service

 

and compensation for purposes of a calculation of a retirement

 

allowance as prescribed in section 20j, beginning 12 midnight

 

eastern daylight time on September 30, 2011.

 

     (b) He or she becomes a qualified participant in Tier 2

 

beginning 12:01 a.m. eastern daylight time on October 1, 2011.

 

     (c) He or she shall receive a retirement allowance calculated

 

under section 20 that is based only on credited service and

 

compensation allowed under section 20j(1) and (2). This subdivision

 

does not affect a person's right to health insurance coverage

 

provided under section 20d or credit for service provided under

 

section 20j(3).

 

     (5) A member who makes the election under this section and the

 

designation under subsection (2) and who does not rescind the

 

election and designation on or before the close of the election

 

period under this section is subject to all of the following:

 

     (a) He or she ceases to receive credit for any future service

 

and compensation for purposes of a calculation of a retirement

 

allowance as prescribed in section 20j, beginning 12 midnight

 

eastern daylight time on the member's attainment date.

 

     (b) He or she becomes a qualified participant in Tier 2

 

beginning 12:01 a.m. on the day after he or she attains 30 years of

 

credited service if he or she remains employed by this state.

 

     (c) He or she shall receive a retirement allowance calculated

 

under section 20 that is based only on credited service and

 

compensation allowed under section 20j(5) and (6). This subdivision

 

does not affect a person's right to health insurance coverage

 

provided under section 20d or credit for service provided under

 

section 20j(7).

 

     (6) Except as otherwise provided in this subsection, a

 

deferred member who is reemployed on or after July 1, 2011 shall be

 

treated in the same manner as a member under section 20j who did

 

not make the election under this section and shall become a

 

qualified participant in Tier 2. However, a deferred member who,

 

while a member, made the election under this section shall have the

 

credited service accrued and compensation received during the time

 

he or she made the contributions under section 35a included in the

 

calculation of a retirement allowance under this act.

 

     (7) A former nonvested member who is reemployed on or after

 

July 1, 2011 is not eligible for membership in Tier 1, shall become

 

a qualified participant in Tier 2, and shall be treated as being

 

first employed by this state as of his or her date of reemployment.

 

     (8) A deferred member of the public school employees

 

retirement system who is first employed and entered upon the

 

payroll of his or her employer on or after July 1, 2011 shall

 

become a qualified participant in Tier 2 and shall not be treated

 

as a member for any purpose.

 

     (9) As used in this section, "attainment date" means that term

 

as defined in section 20j.

 

     Sec. 55. (1) "Plan document" means the document that contains

 

the provisions and procedures of Tier 2 in conformity with this act

 

and the internal revenue code.

 

     (2) "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 Is first employed and entered upon

 

the payroll of his or her employer on or after March 31, 1997, and

 

who before March 31, 1997 would have been eligible to be a member

 

of Tier 1.

 

     (b) An individual who elects Elects to terminate membership in

 

Tier 1 and who elects to participate in Tier 2 in the manner

 

prescribed in section 50.

 

     (c) An individual who is Is an adjutant general or an

 

assistant adjutant general under the Michigan military act, 1967 PA

 

150, MCL 32.501 to 32.851, and who is first employed as an adjutant

 

general or assistant adjutant general on or after January 1, 2011.

 

     (d) Was a member who did not make the election under section

 

50a.

 

     (e) Was a member who made the election under section 50a(1)

 

and the designation under section 50a(2) and who has attained 30

 

years of credited service or who has terminated employment and has

 

been reemployed by this state.

 

     (f) Was a member as described in section 50a(6), (7), or (8).

 

     (3) "Refund beneficiary" means an individual nominated by a

 

qualified participant or a former qualified participant under

 

section 66 to receive a distribution of the participant's

 

accumulated balance in the manner prescribed in section 67.

 

     (4) "State treasurer" means the treasurer of this state.

 

     (5) Except as otherwise provided in this subsection, "year of

 

service" means each period during which a qualified participant is

 

employed by the employer and is credited with 2,080 hours of

 

service. The Tier 2 plan administrator and the plan document may

 

provide for a lesser number of annual hours and a maximum number of

 

hours per pay period for any classification of employees, provided

 

that no participant shall receive credit for more than 1 year of

 

service for any 12-month period of employment. Beginning January 1,

 

2003, full service credit shall also be given to a participant for

 

furlough hours, for required 1-day layoffs, for required and

 

designated temporary layoffs, for a year in which a participant

 

temporarily leaves employment to enter active military duty and

 

then dies during that active military duty, and for participation

 

in the banked leave time program. In the event a terminated

 

participant is reemployed, such individual shall retain credit for

 

all full and partial years of service completed prior to such

 

reemployment, for purposes of determining his or her vesting

 

percentage in any employer contributions made pursuant to section

 

63(2) and (3) after his or her reemployment.

 

     Sec. 64. (1) A qualified participant is immediately 100%

 

vested in his or her contributions made to Tier 2 and employer

 

contributions under the banked leave time program. Except as

 

otherwise provided in this section, 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 eligible for the

 

health insurance coverage provided in section 68 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, and whose termination

 

of employment is before October 1, 2011.

 

     (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 50, 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 20d.

 

     Sec. 65. 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 50, 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 64.

 

     Sec. 67a. (1) Except as otherwise provided in this section or

 

section 33, a qualified participant who becomes totally

 

incapacitated for duty because of a personal injury or disease

 

shall be retired if all of the following apply:

 

     (a) Within 1 year after the qualified participant becomes

 

totally incapacitated or at a later date if the later date is

 

approved by the retirement board, the qualified participant, the

 

qualified participant's personal representative or guardian, his or

 

her department head, or the state personnel director files an

 

application on behalf of the member with the retirement board.

 

     (b) The retirement board finds that the qualified

 

participant's personal injury or disease is the natural and

 

proximate result of the qualified participant's performance of

 

duty.

 

     (c) A medical advisor conducts a medical examination of the

 

qualified participant and certifies in writing that the qualified

 

participant is mentally or physically totally incapacitated for

 

further performance of duty, that the total incapacitation is

 

probably permanent, and that the qualified participant should be

 

retired.

 

     (d) The retirement board concurs in the recommendation of the

 

medical advisor.

 

     (2) If the retirement board grants the application of the

 

qualified participant under subsection (1), the qualified

 

participant shall be granted a supplemental benefit equivalent to

 

the amount provided in section 23 as if the former qualified

 

participant had retired under section 21, which supplemental

 

benefit shall be offset by the value of the distribution of his or

 

her accumulated balance as determined by the retirement system upon

 

becoming a former qualified participant pursuant to section 67.

 

     (3) If a qualified participant dies as a result of a personal

 

injury or disease arising out of and in the course of his or her

 

employment with this state, or if a former qualified participant

 

who retired under subsection (1) who dies before becoming age 60

 

and within 3 years after the former qualified participant's

 

disability retirement from the same causes from which he or she

 

separated, and such death or illness or injuries resulting in death

 

are found by the retirement board to have been the sole and

 

exclusive result of employment with this state, a supplemental

 

benefit shall be granted equivalent to the amount provided for in

 

section 27 had the former qualified participant been considered

 

retired under section 27, 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 67.

 

     (4) A qualified participant, former qualified participant, or

 

beneficiary of a deceased participant, which participant is

 

eligible for a duty disability retirement allowance pursuant to

 

subsection (1), (2), or (3), is eligible for health insurance

 

coverage under section 20d in all respects and under the same terms

 

as would be a retirant and his or her beneficiaries under Tier 1.

 

     (5) Except as otherwise provided in this section or section

 

33, a qualified participant who becomes totally incapacitated for

 

duty because of a personal injury or disease that is not the

 

natural and proximate result of the qualified participant's

 

performance of duty may be retired if all of the following apply:

 

     (a) Within 1 year after the qualified participant becomes

 

totally incapacitated or at a later date if the later date is

 

approved by the retirement board, the qualified participant, the

 

qualified participant's personal representative or guardian, the

 

qualified participant's department head, or the state personnel

 

director files an application on behalf of the qualified

 

participant with the retirement board.

 

     (b) A medical advisor conducts a medical examination of the

 

qualified participant and certifies in writing that the qualified

 

participant is mentally or physically totally incapacitated for

 

further performance of duty, that the incapacitation is likely to

 

be permanent, and that the qualified participant should be retired.

 

     (c) The qualified participant has been a state employee for at

 

least 10 years.

 

     (6) If the retirement board grants the application of the

 

qualified participant under subsection (5), the qualified

 

participant shall be granted a supplemental benefit equivalent to

 

the amount provided for in section 25 as if the qualified

 

participant had retired under section 24. The supplemental benefit

 

shall be offset by the value of the distribution of his or her

 

accumulated balance as determined by the retirement system upon

 

becoming a former qualified participant pursuant to section 67.

 

     (7) If Except as otherwise provided in this section, if a

 

qualified participant who has been a state employee for the number

 

of years necessary to vest under Tier 1 dies as a result of causes

 

occurring not in the performance of duty to this state, a

 

supplemental benefit shall be granted equivalent to the amount

 

provided for in section 25 had the former qualified participant

 

been considered retired under section 24, which supplemental

 

benefit shall be offset by the value of the distribution of his or

 

her accumulated balance as determined by the retirement system upon

 

becoming a former qualified participant pursuant to section 67.

 

     (8) A qualified participant, former qualified participant, or

 

beneficiary of a deceased participant, which participant is

 

eligible for a disability retirement allowance pursuant to

 

subsection (4) or (5), is eligible for health insurance coverage

 

under section 20d in all respects and under the same terms as would

 

be a retirant and his or her beneficiaries under Tier 1.

 

     (9) This section does not apply to a qualified participant or

 

former qualified participant who was a member who meets the

 

requirements of section 55(2)(d), (e), or (f).

 

     Sec. 68. (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 eligible for

 

health benefits under section 64(2).

 

     (b) The former qualified participant meets or exceeds the

 

benefit commencement age employed in the actuarial present value

 

calculation under section 51 and the service requirements that

 

would have applied to that former qualified participant under Tier

 

1 for receiving health insurance coverage under section 20d, if

 

that former qualified participant was a member of Tier 1.

 

     (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 20d. 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) An individual who elects health insurance coverage under

 

this section shall become a member of a health insurance coverage

 

group authorized pursuant to section 20d.

 

     (4) For a former qualified participant who is eligible to

 

elect health insurance coverage under subsection (1) and who is

 

vested in eligible for those benefits under section 64(2)(a), and

 

for his or her health benefit dependents, this state 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 this state under

 

this subsection. For a former qualified participant who commenced

 

state employment before April 1, 2010 and for his or her health

 

benefit dependents, the portion of the health insurance coverage

 

premium paid by this state under this subsection shall be equal to

 

the product of 3% and the former qualified participant's years of

 

service, up to 30 years, but shall not exceed the lesser of 90% of

 

the payments for health insurance coverage or the portion of the

 

health insurance coverage premiums payable by this state for a

 

retirant, his or her beneficiary, and his or her dependents under

 

section 20d. If the individual elects the health insurance coverage

 

provided under section 20d, the state shall transfer its portion of

 

the amount calculated under this subsection to the health insurance

 

reserve fund created by section 11. For a former qualified

 

participant who commenced state employment on or after April 1,

 

2010 and for his or her health benefit dependents, the portion of

 

the health insurance coverage premium paid by this state under this

 

subsection shall be equal to the product of 3% and the former

 

qualified participant's years of service, up to 30 years, but shall

 

not exceed the lesser of the portion of the health insurance

 

coverage premiums payable by this state for a retirant, his or her

 

beneficiary, and his or her dependents under section 20d or the

 

portion of the health insurance coverage premiums payable by this

 

state for a member who occupies a position in the classified state

 

civil service or has classified civil service status commencing

 

state employment on or after April 1, 2010.

 

     (5) For a former qualified participant who is eligible to

 

elect health insurance coverage under subsection (1) and who is

 

vested in eligible for those benefits under section 64(2)(b), and

 

for his or her health benefit dependents, this state 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 this state under

 

this subsection. The portion of the health insurance coverage

 

premium paid by this state under this subsection shall be equal to

 

the premium amounts paid on behalf of retirants of Tier 1 for

 

health insurance coverage under section 20d. If the individual

 

elects the health insurance coverage provided under section 20d,

 

the state shall transfer its portion of the amount calculated under

 

this subsection to the health insurance reserve fund created by

 

section 11.

 

     (6) Beginning January 1, 2011, any former qualified

 

participant or health benefit dependent who is eligible to elect

 

health insurance coverage under this section and who previously

 

elected coverage under a different plan than the plan authorized

 

under section 20d may either elect coverage under this section or

 

may at his or her own cost participate in coverage under a

 

different plan than the plan authorized under section 20d.

 

     (7) If the department of technology, management, and budget

 

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.

 

     (8) As used in this section, "health insurance coverage" means

 

the hospitalization and medical insurance, dental coverage, vision

 

coverage, and any other health care insurance provided in section

 

20d.

 

     (9) This section does not apply to a qualified participant or

 

former qualified participant whose termination of employment is on

 

or after October 1, 2011, unless the qualified participant or

 

former qualified participant was previously a member of Tier 1 as

 

described in section 64(2)(b).

 

     Sec. 68b. (1) Except as otherwise provided in this section,

 

beginning October 1, 2011, a qualified participant or former

 

qualified participant who was a qualified participant or former

 

qualified participant on September 30, 2011 shall not receive any

 

health insurance coverage premium from this state and shall cease

 

accruing years of service credit for purposes of calculating a

 

portion of the health insurance coverage premium that would have

 

been paid by this state under section 68 as if that section

 

continued to apply and for the portion of the amount to be

 

calculated under this section for crediting to a health

 

reimbursement account.

 

     (2) In lieu of any health insurance coverage premium that

 

might have been paid by this state under section 68, the retirement

 

system shall calculate an amount to be credited to the health

 

reimbursement account within the trust created under the public

 

employee retirement health care funding act, 2010 PA 77, MCL

 

38.2731 to 38.2747, for each qualified participant who meets all of

 

the following requirements:

 

     (a) The qualified participant has 4 or more years of service

 

as of September 30, 2011 and was not a member, deferred member, or

 

former nonvested member of Tier 1.

 

     (b) The qualified participant at termination of employment is

 

at least 60 years of age with at least 10 years of service, or is

 

at least 55 years of age with at least 30 years of service.

 

     (c) The qualified participant is employed by this state

 

immediately prior to his or her termination of employment without

 

previously having incurred a separation from state employment of

 

more than a 60-month period after October 1, 2011.

 

     (3) In lieu of any health insurance coverage premium that

 

might have been paid by this state under section 68, the retirement

 

system shall calculate an amount to be credited to the health

 

reimbursement account within the trust created under the public

 

employee retirement health care funding act, 2010 PA 77, MCL

 

38.2731 to 38.2747, for each former qualified participant who meets

 

all of the following requirements:

 

     (a) The former qualified participant has 10 or more years of

 

service as of September 30, 2011 and was not a member, deferred

 

member, or former nonvested member of Tier 1.

 

     (b) The former qualified participant is at least 60 years of

 

age with at least 10 years of service, or is at least 55 years of

 

age with at least 30 years of service.

 

     (c) The former qualified participant is not reemployed by this

 

state on or after October 1, 2011.

 

     (4) In lieu of any health insurance coverage premium that

 

might have been paid by this state under section 68, the retirement

 

system shall calculate an amount to be credited to the health

 

reimbursement account within the trust created under the public

 

employee retirement health care funding act, 2010 PA 77, MCL

 

38.2731 to 38.2747, for each former qualified participant who meets

 

all of the following requirements:

 

     (a) The former qualified participant has 10 or more years of

 

service as of September 30, 2011 and was not a member, deferred

 

member, or former nonvested member of Tier 1.

 

     (b) The former qualified participant is subsequently

 

reemployed by this state and at termination of the subsequent

 

reemployment is at least 60 years of age with at least 10 years of

 

service, or is at least 55 years of age with at least 30 years of

 

service.

 

     (c) The former qualified participant is employed by this state

 

immediately prior to his or her termination of employment without

 

previously having incurred a separation from state employment of

 

more than a 60-month period after his or her subsequent

 

reemployment.

 

     (5) The amount described in subsections (2), (3), and (4)

 

shall be an amount calculated to approximate the actuarial present

 

value as of 12 midnight September 30, 2011 of the projected

 

retirant health benefits based on the current benefit structure

 

under section 68 and the qualified participant's or former

 

qualified participant's years of service as of September 30, 2011.

 

The amount calculated under this subsection shall be equal to the

 

product of all of the following as determined by the retirement

 

system in consultation with the actuary for the system:

 

     (a) An average monthly premium of $1,000.00, payable for the

 

life of the qualified participant or former qualified participant,

 

which approximates the overall average value of all types of

 

premium coverages for single and multiple lives during both pre-

 

medicare and post-medicare periods.

 

     (b) A frozen benefit accrual percent that is the product of 3%

 

and the qualified participant's or former qualified participant's

 

years of service as of September 30, 2011, up to 30 years.

 

     (c) A deferred life annuity factor equal to the actuarial

 

present value as of September 30, 2011 of $1.00 per month payable

 

for the life of the qualified participant or former qualified

 

participant, based on the following actuarial assumptions:

 

     (i) An interest discount rate of 4% annually for all future

 

years, which approximates the use of an assumed rate of investment

 

return or interest discount rate of 8%, combined with an assumption

 

that the average premium is projected to increase 4% annually for

 

all future years.

 

     (ii) Mortality rates based on a 50% male - 50% female blend of

 

the 1994 group annuity mortality table set forward 1 year for both

 

males and females.

 

     (iii) Commencement of the $1.00 per month deferred life annuity

 

based on an assumption that the qualified participant will

 

terminate employment immediately upon meeting the eligibility

 

requirements of subsection (2)(b) and that the former qualified

 

participant would have received health insurance coverage upon

 

meeting the earliest eligibility requirements of subsection (3)(b)

 

or (4)(b) based on his or her years of service as of September 30,

 

2011.

 

     (6) The amount calculated under subsection (5) shall be

 

increased with interest at the special yearly interest rate per

 

year from September 30, 2011 to the date of the qualified

 

participant's or former qualified participant's actual termination

 

of employment as provided in subsection (2)(b) or (4)(b) or the

 

former qualified participant's attainment of the age and years of

 

service as provided in subsection (3)(b).

 

     (7) In lieu of any health insurance coverage premium that

 

might have been paid by this state under section 68, a credit to a

 

health reimbursement account within the trust created under the

 

public employee retirement health care funding act, 2010 PA 77, MCL

 

38.2731 to 38.2747, shall be made by this state for any qualified

 

participant who meets all of the following requirements:

 

     (a) The qualified participant had less than 4 years of service

 

on September 30, 2011 or is first employed by this state on or

 

after October 1, 2011.

 

     (b) The qualified participant is at least 65 years of age and

 

has at least 10 years of service at the time of his or her

 

termination of employment.

 

     (c) The qualified participant is employed by this state

 

immediately prior to his or her termination of employment without

 

previously having incurred a separation from state employment of

 

more than a 60-month period after October 1, 2011.

 

     (8) In lieu of any health insurance coverage premium that

 

might have been paid by this state under section 68, a credit to a

 

health reimbursement account within the trust created under the

 

public employee retirement health care funding act, 2010 PA 77, MCL

 

38.2731 to 38.2747, shall be made by this state for any former

 

qualified participant who meets all of the following requirements:

 

     (a) The former qualified participant has less than 10 years of

 

service as of September 30, 2011 and was not a member, deferred

 

member, or former nonvested member of Tier 1.

 

     (b) The former qualified participant is subsequently

 

reemployed by this state and at termination of the subsequent

 

reemployment is at least 65 years of age and has at least 10 years

 

of service.

 

     (c) The former qualified participant is employed by this state

 

immediately prior to his or her termination of employment without

 

previously having incurred a separation from state employment of

 

more than a 60-month period after his or her subsequent

 

reemployment.

 

     (9) The amount of the credit as described in subsections (7)

 

and (8) shall be $2,000.00 and shall be paid upon termination of

 

employment of the qualified participant or upon termination of the

 

subsequent reemployment of the former qualified participant.

 

     (10) This section does not apply to any of the following:

 

     (a) A former member who made an election to become a qualified

 

participant under section 50.

 

     (b) A member who did not make the election under section 50a.

 

     (c) A member who made the election under section 50a(1) and

 

the designation under section 50a(2), who has attained 30 years of

 

credited service, and who remains employed by this state.

 

     (d) A former qualified participant who is receiving a health

 

insurance coverage premium paid by this state under section 68 on

 

September 30, 2011.

 

     (11) The retirement system shall determine the method for

 

implementation of this section.

 

     (12) Beginning October 1, 2011, the retirement system shall

 

annually calculate the special yearly interest rate subject to this

 

subsection. The special yearly interest rate calculated under this

 

subsection shall not be less than 0% and shall not be more than 3%.

 

As used in this section, "special yearly interest rate" means a

 

rate calculated where the numerator is the consumer price index for

 

the month of June immediately preceding each October 1 and the

 

denominator is the consumer price index for the month of June

 

immediately preceding the previous October 1. As used in this

 

subsection, "consumer price index" means the consumer price index

 

for all urban consumers, not seasonally adjusted, U.S. city

 

average, all items, base years 1982-1984, as determined by the

 

United States department of labor and in effect October 1, 2011. If

 

the consumer price index is restructured subsequent to 2011 in a

 

manner materially changing its character, the retirement system

 

shall select a comparable index after consulting with the

 

retirement system actuary.

 

     Sec. 68c. (1) Except as otherwise provided in this section, a

 

retirant who is receiving a retirement allowance under this act and

 

is employed by this state beginning on or after October 2, 2007

 

agrees to forfeit his or her right to receive that retirement

 

allowance during this period of state employment. The retirement

 

system shall cease payment of the retirement allowance to a

 

retirant described in this subsection during this period of state

 

employment and shall reinstate payment of the retirement allowance

 

without recalculation when the period of state employment ceases.

 

This subsection does not apply to a retirant who is directrly or

 

indirectly employed by this state on October 1, 2007 so long as he

 

or she remains in the position held by the retirant on October 1,

 

2007. As used in this subsection, "employed by this state" means

 

employed directly by this state as an employee, or indirectly by

 

this state through a contractual arrangement with other parties, .

 

Beginning after October 1, 2010, "employed by this state" shall

 

also include or by engagement of the retirant by the this state as

 

an independent contractor. This subsection does not apply to a

 

retirant who is engaged as an independent contractor on October 1,

 

2010 so long as the retirant remains engaged in the same contract

 

that was held by the retirant on October 1, 2010 without amendment

 

or extension.

 

     (2) A hospital, medical-surgical, and sick care benefits plan,

 

dental plan, vision plan, and hearing plan that covers retirants,

 

retirant allowance beneficiaries, former qualified participants,

 

and health benefit dependents under this act shall contain a

 

coordination of benefits provision that provides all of the

 

following:

 

     (a) If the person covered under any of the plans is also

 

eligible for medicare, then the benefits under medicare shall be

 

determined before the health insurance benefits under this act.

 

     (b) If a person covered under any of the plans provided by

 

this act is also covered under another plan that contains a

 

coordination of benefits provision, the benefits shall be

 

coordinated as provided in 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 act 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 provided pursuant to

 

this act.

 

     (3) Subsection (1) does not apply to a retirant if all of the

 

following apply:

 

     (a) The retirant is hired to provide health care services to

 

individuals under the jurisdiction of the department of

 

corrections.

 

     (b) The retirant is hired in a position that is limited in

 

term, no benefits are paid, and pay is on a per diem basis.

 

     (c) The department of corrections provides written notice to

 

the state budget office and the department of technology,

 

management, and budget that attempts have been made to fill the

 

position through postings and recruitment and that the position

 

vacancy still exists.

 

     (d) The department of corrections reports the employment of a

 

retirant under this subsection within 30 days of employment of the

 

retirant to the state budget office and the department of

 

technology, management, and budget. The report shall include the

 

name of the retirant, the capacity in which the retirant is

 

employed, and the total compensation paid to the retirant.

 

     (4) Subsection (1) does not apply to the appointment of a

 

retirant who was an assistant attorney general as a special

 

assistant attorney general when the attorney general determines

 

that, as a result of his or her previous employment with the state,

 

the retirant possesses specialized expertise and experience

 

necessary for the appointment and that the appointment is the most

 

cost-effective option for this state.

 

     (5) Subsection (1) does not apply to the state's engaging the

 

services of a retirant if the state budget director determines

 

that, as a result of his or her previous employment with the state,

 

the retirant possesses specialized expertise and experience

 

necessary for the engagement and that the engagement is the most

 

cost-effective option for this state.

 

     Sec. 68e. (1) There is appropriated for the fiscal year ending

 

September 30, 2011 $1,900,000.00 to the office of retirement

 

services in the department of technology, management, and budget

 

for administration of the changes under the amendatory act that

 

added this section.

 

     (2) The appropriation authorized under subsection (1) is a

 

work project appropriation, and any unencumbered or unallotted

 

funds are carried forward into the following fiscal year. The

 

following is in compliance with section 451a(1) of the management

 

and budget act, 1984 PA 431, MCL 18.1451a:

 

     (a) The purpose of the project is to administer changes under

 

the amendatory act that added this section.

 

     (b) The work project will be accomplished through a plan

 

utilizing interagency agreements, employees, and contracts.

 

     (c) The total estimated completion cost of the work project is

 

$1,900,000.00.

 

     (d) The estimated completion date for the work project is

 

September 30, 2012.

 

     Enacting section 1. If the office of retirement services in

 

the department of technology, management, and budget receives

 

notification from the United States internal revenue service that

 

any section or any portion of a section of this amendatory act 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.

 

     Enacting section 2. This amendatory act does not take effect

 

unless Senate Bill No. 407                                    

 

            of the 96th Legislature is enacted into law.