Bill Text: MI SB0642 | 2009-2010 | 95th Legislature | Introduced
Bill Title: Retirement; state police; deferred retirement option plan (DROP) program; eliminate. Amends sec. 24a of 1986 PA 182 (MCL 38.1624a).
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2009-06-17 - Referred To Committee On Appropriations [SB0642 Detail]
Download: Michigan-2009-SB0642-Introduced.html
SENATE BILL No. 642
June 17, 2009, Introduced by Senator SWITALSKI and referred to the Committee on Appropriations.
A bill to amend 1986 PA 182, entitled
"State police retirement act of 1986,"
by amending section 24a (MCL 38.1624a), as added by 2004 PA 83.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 24a. (1) A deferred retirement option plan is established
within the defined benefit plan that is part of the retirement
system, and it is to be administered by the office of retirement
services. Exclusively represented members of the retirement system
may only participate in the deferred retirement option plan
pursuant to notice from their collective bargaining agent that the
agent agrees to the terms of the deferred retirement option plan.
For
each fiscal year that begins on or after October 1, 2004, the
director
of state police and the retirement board may elect to
discontinue
accepting applications for the deferred retirement
option
plan. For each fiscal year
that begins on or after October
1, 2009, the director of state police and the retirement board
shall discontinue accepting applications for the deferred
retirement option plan.
(2) An officer who has 25 years or more of credited service
under this act or former act 1935 PA 251, or both, may elect to
participate in the deferred retirement option plan by executing the
application provided by the office of retirement services. Once the
application is accepted by the office of retirement services, the
officer's participation in the deferred retirement option plan is
irrevocable and he or she becomes a DROP participant. The officer
is solely responsible for any federal, state, or local tax due as a
result of his or her participation in the deferred retirement
option plan.
(3) Participation in the deferred retirement option plan does
not guarantee continued employment. Except as otherwise provided in
this section, an officer who elects to participate in the deferred
retirement option plan will remain an active employee eligible to
receive any applicable wage changes and benefits, will be subject
to civil service rules and regulations, and will be subject to the
policies and procedures of the department of state police and
subject to removal by the governor, if applicable, in the same
manner as if he or she had not elected to participate in the
deferred retirement option plan.
(4) An officer shall indicate on the application for the
deferred retirement option plan the number of years that the
officer wants to participate in the deferred retirement option
plan, up to a maximum of 6 years. As a condition for participation,
the officer agrees to retire at the conclusion of his or her
participation in the deferred retirement option plan.
(5) A deferred retirement option plan account shall be created
in the accounting records of the retirement system for each DROP
participant. Each deferred retirement option plan account shall
earn interest at the rate of 3% per annum, prorated for any
fraction of a year. The deferred retirement option plan account of
a DROP participant shall be credited with the following percentage
of his or her monthly retirement allowance as calculated pursuant
to section 24 as if he or she had retired on the day prior to
becoming a DROP participant:
(a) 100% if the officer remains in the deferred retirement
option plan for 6 years.
(b) 90% if the officer remains in the deferred retirement
option plan for 5 years but less than 6 years.
(c) 80% if the officer remains in the deferred retirement
option plan for 4 years but less than 5 years.
(d) 70% if the officer remains in the deferred retirement
option plan for 3 years but less than 4 years.
(e) 60% if the officer remains in the deferred retirement
option plan for 2 years but less than 3 years.
(f) 50% if the officer remains in the deferred retirement
option plan for 1 year but less than 2 years.
(g) 30% if the officer remains in the deferred retirement
option plan for less than 1 year.
(6) A DROP participant shall not receive a monthly retirement
allowance, as calculated pursuant to section 24, until termination
of his or her deferred retirement option plan participation and
commencement of retirement. A DROP participant shall not have any
claim to any funds in his or her deferred retirement option plan
account until he or she retires at the termination of his or her
deferred retirement option plan participation.
(7) Upon termination of the deferred retirement option plan
participation and commencement of retirement, the former DROP
participant shall select 1 or more of the following options with
regard to his or her deferred retirement option plan account:
(a) A total lump-sum distribution.
(b) A partial lump-sum distribution.
(c) A lump-sum direct rollover to another qualified plan if
allowed by federal law and subject to the procedures of the
retirement system.
(d) Maintain the funds in the account.
A former DROP participant shall remove all funds from his or
her deferred retirement option plan account no later than April 1
following the later of the calendar year in which the DROP
participant attains 70 years, 6 months of age or the calendar year
in which the DROP participant is retired.
(8) If a DROP participant or former DROP participant dies
before removing all funds from his or her deferred retirement
option plan account, the former DROP participant's designated
beneficiary shall receive any remaining balances. If the former
DROP participant has not named a beneficiary for his or her
deferred retirement option plan account, the amount in the deferred
retirement option plan account shall be paid to the beneficiary of
the former DROP participant's retirement allowance. If the former
DROP participant has not named a beneficiary to his or her
retirement allowance, the balance in the former DROP participant's
account shall be paid to the former DROP participant's estate.
(9) If a DROP participant is found to be disabled under
section 29, his or her participation in the deferred retirement
option plan shall immediately cease and he or she shall be retired.
(10) The deferred retirement option plan shall be administered
in compliance with section 415 of the internal revenue code, 26 USC
415, and regulations under that section that are applicable to a
governmental deferred retirement option plan. If there is a
conflict between this subsection and another subsection of this
section, this subsection prevails.
(11) A deferred retirement option plan shall not be
implemented until the civil service commission adopts rules to
regulate all of the following:
(a) A DROP participant's payment for sick leave, annual leave,
longevity, and related items.
(b) A DROP participant's accrual of sick leave, annual leave,
compensatory time, and related items.
(c) A DROP participant's payment of group insurance plan
premiums.
(12) If the department receives notification from the United
States internal revenue service that this section or any portion of
this section will cause the retirement system to be disqualified
for tax purposes under the internal revenue code, 26 USC 1 to 1789,
then the portion that will cause the disqualification does not
apply.
