Bill Text: MI SB1133 | 2015-2016 | 98th Legislature | Introduced

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Bill Title: Retirement; state employees; naming a second spouse as beneficiary if first spouse predeceases him or her and naming of spouse as beneficiary if marriage occurs or is recognized after retirement allowance effective date; allow, and revise the determination of a beneficiary's actuarial equivalent retirement allowance. Amends secs. 20d, 31 & 49 of 1943 PA 240 (MCL 38.20d et seq.).

Spectrum: Slight Partisan Bill (Democrat 3-1)

Status: (Introduced - Dead) 2016-10-20 - Referred To Committee On Appropriations [SB1133 Detail]

Download: Michigan-2015-SB1133-Introduced.html

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SENATE BILL No. 1133

 

 

October 20, 2016, Introduced by Senators HERTEL, HOOD, BRANDENBURG and GREGORY and referred to the Committee on Appropriations.

 

 

 

     A bill to amend 1943 PA 240, entitled

 

"State employees' retirement act,"

 

by amending sections 20d, 31, and 49 (MCL 38.20d, 38.31, and

 

38.49), section 20d as amended by 2002 PA 93, section 31 as amended

 

by 2002 PA 99, and section 49 as amended by 2011 PA 264.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 20d. (1) On and after July 1, After June 30, 1974,

 

hospitalization and medical coverage insurance premium payable by

 

any a retirant or his or her beneficiary and his or her dependents

 

under any a group health plan authorized by the Michigan civil

 

service commission and the department of technology, management,

 

and budget shall must be paid by the retirement board from the

health insurance reserve fund created in section 11. The amount

 

payable shall must be in the same proportion of premium payable by

 

the state of Michigan this state for the classified employees

 

occupying positions in the state civil service. The hospitalization

 

and medical insurance premium payable shall must be paid from

 

appropriations made for this purpose to the health insurance

 

reserve fund sufficient to cover the premium payment needed to be

 

made.

 

     (2) Effective January 1, 1988, 90% of the premium payable by a

 

retirant or the retirant's beneficiary and his or her dependents

 

for dental coverage or vision coverage, or both, under any a group

 

plan authorized by the Michigan civil service commission and the

 

department of technology, management, and budget shall must be paid

 

by the retirement board from the health insurance reserve fund

 

created in section 11.

 

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

 

calculate for each fiscal year any cost savings that have accrued

 

to this state as a result of the implementation of 1996 PA 487 over

 

the costs that would have been incurred by this state to fund

 

premiums payable pursuant to under section 68 had 1996 PA 487 not

 

been implemented. The total amount of the cost savings, if any,

 

shall must be allocated to the health advance funding subaccount

 

created under section 11(9).

 

     (4) On and after After March 31, 30, 1997, the retirement

 

system shall also pay health insurance premiums described in this

 

section in the manner prescribed in section 68.

 

     (5) Except as otherwise provided in this subsection, beginning

on the effective date of the 2016 amendatory act that amended this

 

section, on the death of the retirant, a retirement allowance

 

beneficiary who became a retirement allowance beneficiary under

 

section 31(10)(a) or (c) or (11) is not a health insurance

 

dependent and is not entitled to health benefits under this

 

section. Beginning on the effective date of the 2016 amendatory act

 

that amended this section, a surviving spouse selected as a

 

retirement allowance beneficiary under section 31(10)(a) or (c) or

 

(11) may elect the insurance coverages provided in this section if

 

payment for the elected coverages is the responsibility of the

 

surviving spouse and is paid in a manner prescribed by the

 

retirement system.

 

     (6) (5) For purposes of this section, "retirant" includes a

 

person an individual who retires under section 306 or 410 of the

 

Michigan military act, 1967 PA 150, MCL 32.706 and 32.810.

 

     Sec. 31. (1) Except as otherwise provided in subsection (6),

 

(10), or (11), before the effective date of retirement, but not

 

after the effective date of retirement, a member or deferred member

 

who is eligible for retirement, as provided in this act, shall

 

elect to receive his or her benefit in a retirement allowance

 

payable throughout life, which shall be called a regular retirement

 

allowance, or to receive the actuarial equivalent at that time of

 

his or her regular retirement allowance in a reduced retirement

 

allowance payable throughout the lives of the retirant and a

 

retirement allowance beneficiary, pursuant to under 1 of the

 

following payment options:

 

     (a) Option A. Upon On the retirant's death, his or her reduced

retirement allowance shall will be continued throughout the life of

 

and paid to the retirement allowance beneficiary whom the member

 

nominated by written designation executed and filed with the

 

retirement board before the effective date of his or her

 

retirement.

 

     (b) Option B. Upon On the retirant's death, 1/2 of his or her

 

reduced retirement allowance shall will be continued throughout the

 

life of and paid to the retirement allowance beneficiary whom the

 

member nominated by written designation executed and filed with the

 

retirement board before the effective date of his or her

 

retirement.

 

     (c) Option C. On and after January 1, 2000, upon After

 

December 31, 1999, on the retirant's death, 3/4 of his or her

 

reduced retirement allowance shall will be continued throughout the

 

life of and paid to the retirement allowance beneficiary whom the

 

member nominated by written designation executed and filed with the

 

retirement board before the effective date of his or her

 

retirement.

 

     (2) Except as otherwise provided in subsections subsection

 

(3), and (8), (10), or (11), the election of a payment option under

 

subsection (1) shall must not be changed on or after the effective

 

date of the retirement allowance. A Except as otherwise provided in

 

this section, a retirement allowance beneficiary designated under

 

this section shall must not be changed on or after the effective

 

date of the retirement allowance, and shall must be either a

 

spouse, brother, sister, parent, child, including an adopted child,

 

or grandchild of the person individual making the designation.

Payment to a retirement allowance beneficiary shall must begin on

 

the first day of the month following the death of the retirant or

 

member.

 

     (3) If Except as otherwise provided in subsection (10), if the

 

retirement allowance beneficiary named under a payment option under

 

subsection (1) predeceases the retirant, the retirant's benefit

 

shall must revert to the regular retirement allowance, effective

 

with the first day of the month following after the retirement

 

allowance beneficiary's death. For This subsection applies to a

 

retirant whose effective date of retirement was on or before June

 

28, 29, 1976, this subsection shall apply, but the regular

 

retirement allowance is not payable for any month beginning before

 

the later of the retirement allowance beneficiary's death or

 

January 1, 1986. A retirant who on January 1, 1986 is receiving a

 

reduced retirement allowance because the retirant designated a

 

retirement allowance beneficiary and the retirement allowance

 

beneficiary predeceased the retirant is eligible to receive the

 

regular retirement allowance beginning January 1, 1986, but the

 

regular retirement allowance is not payable for any month beginning

 

before January 1, 1986.

 

     (4) A member who continues in the employ of to be employed by

 

this state on and after the date he or she the member acquires 10

 

years of service credit or becomes eligible for deferred retirement

 

as provided by section 20(4) or (5), whichever occurs first, may by

 

written declaration executed and filed with the retirement board

 

elect option A, provided for in subsection (1)(a), and nominate a

 

retirement allowance beneficiary in the same manner as if the

member were then retiring from service, notwithstanding that the

 

member may not have attained 60 years of age. If the beneficiary's

 

death or divorce from the member occurs before the effective date

 

of the member's retirement, the member's election of option A and

 

nomination of retirement allowance beneficiary shall must be

 

automatically revoked and the member may again elect option A and

 

nominate a retirement allowance beneficiary at any time before the

 

effective date of retirement. If a member who has made an election

 

and nominated a retirement allowance beneficiary as provided in

 

this subsection dies before the effective date of his or her

 

retirement, then the retirement allowance beneficiary shall must

 

immediately receive the retirement allowance that he or she would

 

have been entitled to receive under option A if the member had been

 

regularly retired on the date of the member's death. Except as

 

otherwise provided by subsection (5), if a member who has made an

 

election under this subsection subsequently retires under this act,

 

his or her election of option A shall take takes effect at the time

 

of retirement. Subject to the requirements of subsection (5), the

 

member, before the effective date of retirement, but not after the

 

effective date of retirement, may revoke his or her previous

 

election of option A and elect to receive his or her retirement

 

allowance as a regular retirement allowance or under option B or C

 

as provided for in subsection (1). A retirement allowance shall

 

must not be paid under this subsection on account because of the

 

death of a member if any benefits are paid under section 27 on

 

account because of his or her death. If a deferred member who has

 

an option A election in effect dies before the effective date of

his or her retirement, the retirement allowance payable under

 

option A shall must be paid to the retirement allowance beneficiary

 

at the time the deceased deferred member otherwise would have been

 

eligible to begin receiving benefits.

 

     (5) If a member, deferred member, retiring member, or retiring

 

deferred member is married at the effective date of the retirement

 

allowance, an election under this section, other than an election

 

of a payment option under subsection (1) naming the spouse as

 

retirement allowance beneficiary, shall is not be effective unless

 

the election is signed by the spouse. However, this requirement may

 

be waived by the retirement board if the signature of a spouse

 

cannot be obtained because of extenuating circumstances. As used in

 

this subsection, "spouse" means the person individual to whom the

 

member, deferred member, retiring member, or retiring deferred

 

member is married at the effective date of the retirement

 

allowance.

 

     (6) Until July 1, 1991, upon on request in a form as

 

determined by the retirement board, a nonduty disability retirant

 

who retired under section 24 may change his or her election to

 

receive a disability retirement allowance computed as a regular

 

retirement allowance and elect to receive the actuarial equivalent

 

at the time of the election pursuant to under this subsection of

 

his or her disability retirement allowance in a reduced retirement

 

allowance payable to the retirant and the retirant's spouse

 

pursuant to under the provisions of a payment option as provided in

 

subsection (1), if the disability retirement allowance effective

 

date was before November 12, 1985 and the retirant had 25 or more

years of credited service on the disability retirement allowance

 

effective date. The nonduty disability retirant shall must begin to

 

receive the reduced retirement allowance under this subsection

 

effective the first day of the month following the month in which

 

the retirant makes the election pursuant to under this subsection.

 

As used in this subsection, "spouse" means the person individual to

 

whom the nonduty disability retirant was married on the effective

 

date of his or her disability retirement allowance and on the date

 

the retirant makes the election pursuant to under this subsection.

 

     (7) If a member who continues in the employ of to be employed

 

by this state on and after the date he or she the member acquires

 

10 years of service credit, or on and after the date he or she the

 

member becomes eligible for deferred retirement as provided by

 

section 20(4) or (5), whichever occurs first, and who does not have

 

an election of option A in force as provided in subsection (4),

 

dies before the effective date of retirement and leaves a surviving

 

spouse, the spouse shall must receive a retirement allowance

 

computed in the same manner as if the member had retired effective

 

the day before the date of his or her death, elected option A, and

 

nominated the spouse as retirement allowance beneficiary. When the

 

retirement allowance beneficiary dies, his or her retirement

 

allowance shall must terminate. If the aggregate amount of

 

retirement allowance payments received by the beneficiary is less

 

than the accumulated contributions credited to the member's account

 

in the employees' savings fund at the time of the member's death,

 

the difference between the accumulated contributions and the

 

aggregate amount of retirement allowance payments received by the

beneficiary shall must be transferred from the employer's

 

accumulation fund or pension reserve fund to the employees' savings

 

fund and paid pursuant to under section 29. A retirement allowance

 

shall must not be paid under this subsection on account because of

 

the death of a member if benefits are paid under section 27 on

 

account because of his or her death. If the other requirements of

 

this subsection are met but a surviving spouse does not exist, each

 

of the deceased member's surviving children less than 18 years of

 

age shall must receive an allowance of an equal share of the

 

retirement allowance that would have been paid to the spouse if

 

living at the time of the deceased member's death. Payments under

 

this subsection shall must cease upon on the surviving child's

 

marriage, adoption, or becoming 18 years of age, which occurs

 

first.

 

     (8) If a retirant receiving a reduced retirement allowance

 

under a payment option under subsection (1) is divorced from the

 

spouse who had been designated as the retirant's retirement

 

allowance beneficiary under the payment option, the retirement

 

system shall consider the election of the payment option shall be

 

considered void by the retirement system if the judgment of divorce

 

or award or order of the court, or an amended judgment of divorce

 

or award or order of the court, described in the public employee

 

retirement benefit protection act, 2002 PA 100, MCL 38.1681 to

 

38.1689, and dated after June 27, 1991 provides that the election

 

of the payment option under subsection (1) is to be considered void

 

by the retirement system and the retirant provides a certified copy

 

of the judgment of divorce or award or order of the court, or an

amended judgment of divorce or award or order of the court, to the

 

retirement system. If the retirement system considers the election

 

of a payment option under subsection (1) is considered void by the

 

retirement system under this subsection, the retirant's retirement

 

allowance shall must revert to a regular retirement allowance,

 

including postretirement adjustments, if any, subject to an award

 

or order of the court as described in the public employee

 

retirement benefit protection act, 2002 PA 100, MCL 38.1681 to

 

38.1689. The retirement allowance shall must revert to a regular

 

retirement allowance under this subsection effective the first of

 

the month after the date the retirement system receives a certified

 

copy of the judgment of divorce or award or order of the court.

 

This subsection does not supersede a judgment of divorce or award

 

or order of the court in effect on June 27, 1991. This subsection

 

does not require the retirement system to distribute or pay

 

retirement assets on behalf of a retirant in an amount that exceeds

 

the actuarially determined amount that would otherwise become

 

payable if a judgment of divorce had not been rendered.

 

     (9) If the retirement allowance payments terminate before an

 

aggregate amount equal to the retirant's accumulated contributions

 

has been paid, the difference between the retirant's accumulated

 

contributions and the aggregate amount of retirement allowance

 

payments made must be paid to the individual designated in a

 

writing filed with the retirement board on a form provided by the

 

retirement board. If the designated individual does not survive the

 

retirant or retirement allowance beneficiary, the difference must

 

be paid to the deceased recipient's estate or to the legal

representative of the deceased recipient.

 

     (10) A retirant who selected a retirement allowance

 

beneficiary under subsection (1)(a), (b), or (c) may change his or

 

her retirement allowance beneficiary only if all of the following

 

requirements are met:

 

     (a) The retirant was married on his or her retirement

 

allowance effective date and all of the following apply:

 

     (i) The first retirement allowance beneficiary predeceases the

 

retirant after the retirement allowance effective date.

 

     (ii) The retirant marries another spouse after the retirement

 

allowance effective date.

 

     (iii) The retirant files a written request with the retirement

 

system to name his or her current spouse as a retirement allowance

 

beneficiary not earlier than 180 days and not later than 1 year

 

after the marriage of the retirant and the current spouse. However,

 

a retirant whose first retirement allowance beneficiary predeceases

 

the retirant after the retirement allowance effective date and

 

before the effective date of the amendatory act that added this

 

subsection has 180 days after the effective date of the amendatory

 

act that added this subsection to file a written request with the

 

retirement system.

 

     (b) The retirant was married on the effective date of his or

 

her retirement, but his or her marriage was not recognized by this

 

state and all of the following apply:

 

     (i) The retirant continues to be married to the same spouse to

 

whom he or she was married on the effective date of retirement and

 

whose marriage is currently recognized by this state.

     (ii) The retirant files a written request with the retirement

 

system selecting 1 of the payment options provided in subsection

 

(1) and designating his or her current spouse as a retirement

 

allowance beneficiary not earlier than 180 days and not later than

 

1 year after the date of marriage of the retirant and the current

 

spouse. However, a retirant whose date of marriage is after the

 

retirement allowance effective date and before the effective date

 

of the amendatory act that added this subsection has 180 days after

 

the effective date of the amendatory act that added this subsection

 

to file a written request with the retirement system.

 

     (c) The retirant was not married on his or her retirement

 

allowance effective date and all of the following apply:

 

     (i) The retirant marries after the retirement allowance

 

effective date.

 

     (ii) The retirement allowance beneficiary is the retirant's

 

spouse.

 

     (iii) The retirant files a written request with the retirement

 

system to name his or her current spouse as a retirement allowance

 

beneficiary not earlier than 180 days and not later than 1 year

 

after the date of marriage of the retirant and the current spouse.

 

However, a retirant whose date of marriage is after the retirement

 

allowance effective date and before the effective date of the

 

amendatory act that added this subsection has 180 days after the

 

effective date of the amendatory act that added this subsection to

 

file a written request with the retirement system.

 

     (11) A retirant who was not married on his or her retirement

 

allowance effective date and who did not select a payment option

provided in this section may select an optional form of benefit

 

payment under subsection (1)(a), (b), or (c) and designate a

 

retirement allowance beneficiary if all of the following apply:

 

     (a) The retirant marries after his or her retirement allowance

 

effective date.

 

     (b) The retirement allowance beneficiary is the retirant's

 

spouse.

 

     (c) The retirant files a written request with the retirement

 

system to select the optional form of benefit payment under

 

subsection (1)(a), (b), or (c) and to designate his or her spouse

 

as the retirement allowance beneficiary, not earlier than 180 days

 

and not later than 1 year after the retirant's marriage. However, a

 

retirant whose date of marriage is after the retirement allowance

 

effective date and before the effective date of the amendatory act

 

that added this subsection has 180 days after the effective date of

 

the amendatory act that added this subsection to file a written

 

request with the retirement system.

 

     (12) The retirement allowance of the retirant who makes an

 

election under subsection (10) or (11) must not be greater than the

 

actuarial equivalent of the regular retirement allowance as

 

determined by the retirement board and must become effective the

 

first day of the month after the filing of the written request with

 

the retirement system.

 

     (13) If the retirant dies no later than 12 months after the

 

effective date of his or her election under subsection (10) or

 

(11), the retirement allowance for the surviving spouse established

 

under subsection (10)(a) or (b) or (11) must terminate 12 months

after the death of the retirant.

 

     (14) As used in this section:

 

     (a) "Date of marriage" means the date that a marriage is

 

recognized by this state.

 

     (b) "Regular retirement allowance" means a retirement

 

allowance payable for life.

 

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

 

401(a) of the internal revenue code, 26 USC 401, that which 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 exempt from taxation 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 Internal Revenue Service on April 5, 2007. Employer-

 

financed benefits provided by the retirement system under this act

 

shall must 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 applies 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 must be held in

 

trust and invested for the sole purpose of meeting the legitimate

 

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

 

any other purpose. The assets shall must 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 on retirement, pursuant to internal revenue

 

service under Internal Revenue Service regulations and approved

 

internal revenue service Internal Revenue Service exclusion ratio

 

tables.

 

     (5) The required beginning date for retirement allowances and

 

other distributions shall must 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 must

 

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 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. December

 

31, 1992. 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 under 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 must be 8% with

 

utilization of the 1983 group annuity and mortality

 

table.determined by the director of the department of technology,

 

management, and budget and the retirement board in consultation

 

with the actuary using the mortality tables recommended by the

 

actuary.

 

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

 

contrary, the compensation of a member of the retirement system

 

shall must 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 an individual who

 

first becomes a member of the retirement system on or after October

 

1, September 30, 1996.

 

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

 

contrary, contributions, benefits, and service credit with respect

 

to qualified military service will must 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, 11, 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 is

 

treated as having resumed and then terminated employment because of

 

death.