HOUSE BILL No. 5857 May 13, 1998, Introduced by Reps. Ciaramitaro and DeHart and referred to the Committee on Public Retirement. A bill to amend 1992 PA 234, entitled "The judges retirement act of 1992," by amending sections 104, 110a, 217, 401a, 504, 701, 702, 705, 706, and 711 (MCL 38.2104, 38.2110a, 38.2217, 38.2401a, 38.2504, 38.2651, 38.2652, 38.2655, 38.2656, and 38.2661), section 104 as amended by 1995 PA 193, sections 110a, 401a, 705, 706, and 711 as added by 1996 PA 523, section 217 as amended by 1996 PA 525, and sections 701 and 702 as amended by 1998 PA 66, and by adding sec- tions 701a, 707a, and 718a. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 104. (1) "Compensation" means 1 of the following: 2 (a) For a plan 1 member or plan 2 member, the salary paid by 3 this state. 4 (b) For a plan 3 member, the salary paid by this state, 5 except that for a plan 3 member who is a judge of the recorder's 06353'98 KKR 2 1 court of the city of Detroit, compensation means an amount equal 2 to the salary paid by this state to a judge of the circuit court 3 and for a plan 3 member who is a judge of the probate court, com- 4 pensation means an amount equal to the salary paidby this state5to a judge of the district courtPURSUANT TO SECTION 821 OF THE 6 REVISED JUDICATURE ACT OF 1961, 1961 PA 236, MCL 600.821. In 7 addition, compensation for a plan 3 member includes salary stan- 8 dardization payments converted as an addition to the state base 9 salary as provided by section 504, if any. 10 (c) For a plan 4 member, the total judicial salary payable 11 from all sources. 12 (d) For a plan 5 member, the total salary paid by this state 13 and the district control unit of the district court in the 14 thirty-sixth district. 15 (e) For a plan 6 or 7 member, the salary approved by the 16 county board of commissioners and includes salary standardization 17 payments made to the member by the county. 18 (2) "County retirement plan" means a county retirement plan 19 established under section 12a ofAct No. 156 of the Public Acts20of 1851, being section 46.12a of the Michigan Compiled Laws1851 21 PA 156, MCL 46.12A. 22 (3) "Court fees" means a court filing fee or costs earmarked 23 for the retirement system and collected by a county clerk, clerk 24 of the circuit court, or clerk of the district court pursuant to 25 sections 880, 2529, 5756, 8371, 8381, and 8420 of the revised 26 judicature act of 1961,Act No. 236 of the Public Acts of 1961,27being sections 600.880, 600.2529, 600.5756, 600.8371, 600.8381,06353'98 3 1and 600.8420 of the Michigan Compiled Laws1961 PA 236, MCL 2 600.880, 600.2529, 600.5756, 600.8371, 600.8381, AND 600.8420. 3 (4) "Credited service" means all of the following: 4 (a) Service credited to a member under this act, the former 5 judges retirement system, and the former probate judges retire- 6 ment system. 7 (b) Other public service purchased under section 403. 8 (c) Service purchased under section 404. 9 (5) "Department" means the department of management and 10 budget. 11 (6) "Direct rollover" means a payment by the retirement 12 system to the eligible retirement plan specified by the 13 distributee. 14 (7) "Distributee" includes a member or vested former 15 member. Distributee also includes the member's or vested former 16 member's surviving spouse or the member's or vested former 17 member's spouse or former spouse under an eligible domestic rela- 18 tions order, with regard to the interest of the spouse or former 19 spouse. 20 (8) "District control unit" means district control unit as 21 defined in section 8104 of the revised judicature act of 1961, 22Act No. 236 of the Public Acts of 1961, being section 600.810423of the Michigan Compiled Laws1961 PA 236, MCL 600.8104. 24 Sec. 110a. (1) "Tier 1" means the retirement plan available 25 under this act to a member who MEETS 1 OF THE FOLLOWING 26 REQUIREMENTS: 06353'98 4 1 (A) THE INDIVIDUAL first became a judge or state official 2 before March 31, 1997 andwhoHE OR SHE does not elect to 3 become a qualified participant of Tier 2 UNDER SECTION 701. 4 (B) THE INDIVIDUAL FIRST BECOMES A JUDGE OR STATE OFFICIAL 5 ON OR AFTER MARCH 31, 1997 AND HE OR SHE ELECTS TO BECOME A 6 MEMBER OF TIER 1 UNDER SECTION 707A. 7 (2) "Tier 2" means the retirement plan established pursuant 8 to the internal revenue code that is available to qualified par- 9 ticipants under article VII. 10 Sec. 217. (1) A court fee fund is created in the state 11 treasury. The state treasurer shall deposit into the court fee 12 fund all money received from the executive secretary pursuant to 13 section 304(4). The state treasurer shall transmit the money in 14 the court fee fund, not exceeding $2,200,000.00 in any fiscal 15 year, to the court equity fund created by section 151b of the 16 revised judicature act OF 1961,being section 600.151b of the17Michigan Compiled Laws,1961 PA 236, MCL 600.151B. IF THE COURT 18 FEE FUND EXCEEDS $2,200,000.00 IN ANY FISCAL YEAR AND 19 $2,200,000.00 IS TRANSMITTED TO THE COURT EQUITY FUND, AN AMOUNT 20 MAY BE APPROPRIATED FROM THE COURT FEE FUND for operational 21 expenses of trial courts. OPERATIONAL EXPENSES MAY INCLUDE THE 22 PAYMENT OF SALARIES OF TRIAL COURT JUDGES OTHER THAN JUDGES OF 23 THE DISTRICT COURT. Any money remaining in the court fee fund at 24 the end of the fiscal year shall remain in the court fee fund and 25 shall not revert to the general fund. 26 (2) This section applies unless the department receives 27 notification from the United States internal revenue service that 06353'98 5 1 this section will cause the retirement system to be disqualified 2 for tax purposes under the internal revenue code. 3 Sec. 401a. (1) Notwithstanding section 401, an individual 4 described in this subsection is not a member of the Tier 1 5 retirement plan: 6 (a) An individual who first becomes a judge or state offi- 7 cial on or after March 31, 1997, UNLESS THAT INDIVIDUAL ELECTS TO 8 BECOME A MEMBER OF TIER 1 UNDER SECTION 707A. 9 (b) An individual who elects to terminate membership under 10 section 701 and who, but for that election, would otherwise be 11 eligible for membership in Tier 1 pursuant to section 401. 12 (2) An individual who first becomes a judge or state offi- 13 cial on or after March 31, 1997 AND WHO DOES NOT MAKE THE ELEC- 14 TION TO BECOME A MEMBER OF TIER 1 UNDER SECTION 707A, is eligible 15 to be a qualified participant in Tier 2 subject to article VII. 16 Sec. 504. (1) Except as otherwise provided in this subsec- 17 tion, a judge who is a plan 3 member shall convert $2,250.00 of 18 the state salary standardization payment annually prescribed by 19 law for any state fiscal year beginning after September 30, 1981 20 as an addition to the judge's state base salary for purposes of 21 computation of a retirement allowance under this act. A judge 22 who, within 30 days from taking office, files a written notice 23 not to participate in the provisions of this subsection with the 24 retirement system is exempt from this subsection. A judge who 25 was serving on December 31, 1982 and who did not elect to convert 26 $2,250.00 of the state salary standardization payment under 27 section 14a of formerAct No. 198 of the Public Acts of 1951,06353'98 6 1 1951 PA 198 is exempt from this section. For the purposes of the 2 calculation of a judge's combined county, city, or district con- 3 trol unit retirement benefit, a judge who has not filed a written 4 notice not to participate in the provisions of this subsection 5 with the retirement system under this subsection or the former 6 judges retirement system shall have the $2,250.00 of the salary 7 standardization payment subtracted from the final average compen- 8 sation figure used to calculate the judge's county, city, or dis- 9 trict control unit retirement benefit. 10 (2) Except as otherwise provided in this subsection, a judge 11 who is a plan 3 member and who is not exempt from subsection (1) 12 shall convert the balance of the state salary standardization 13 payment annually prescribed by law but which, when added to 14 $2,250.00, does not exceed 40% of the difference between the 15 state base salary and the maximum statutory salary established by 16 the revised judicature act for any state fiscal year beginning 17 after September 30, 1982 as an addition to the judge's state base 18 salary for purposes of computation of a retirement allowance 19 under this act. A judge who, before April 1, 1983, or within 30 20 days from taking office, whichever is later, files a written 21 notice not to participate in the provisions of this subsection 22 with the retirement system is exempt from this subsection. For 23 the purposes of the calculation of a judge's combined county, 24 city, or district control unit retirement benefit, a judge who 25 has not filed a written notice not to participate in the provi- 26 sions of this subsection with the retirement system under this 27 subsection or the former judges retirement system shall have the 06353'98 7 1 additional state salary standardization payment as an addition to 2 the judge's state base salary for computation of a retirement 3 allowance under this act subtracted from the final average com- 4 pensation figure used to calculate the judge's county, city, or 5 district control unit retirement benefit. 6 (3) The sum of the final compensation determined for each 7 plan 3 member and the final average compensation figure used as 8 the basis for determining the judge's retirement allowance as a 9 member of a county retirement plan or a retirement system that 10 was established pursuant to the municipal employees retirement 11 act of 1984,Act No. 427 of the Public Acts of 1984, being sec-12tions 38.1501 to 38.1557 of the Michigan Compiled Laws1984 PA 13 427, MCL 38.1501 TO 38.1555, or which is subject toAct No. 44314of the Public Acts of 1980, being sections 38.841 to 38.846 of15the Michigan Compiled Laws1980 PA 443, MCL 38.841 TO 38.846, 16 shall not exceed the judge's total annual salary payable from all 17 sources at the time of his or her retirement. 18 (4) For purposes of subsections (1) and (2), the state base 19 salary of a judge of the probate court who is a plan 3 member is 20 equal to the salary paidby this state to a judge of the dis-21trict courtPURSUANT TO SECTION 821 OF THE REVISED JUDICATURE 22 ACT OF 1961, 1961 PA 236, MCL 600.821. 23 (5) The department or the reporting unit shall deduct the 24 member's required contribution for participation in the provi- 25 sions of subsections (1) and (2) from the member's compensation 26 and shall transfer the contributions to the retirement system. 06353'98 8 1 Sec. 701. (1)TheEXCEPT AS OTHERWISE PROVIDED IN 2 SUBSECTION (3), THE retirement system shall provide an 3 opportunity for each member who is a member on March 30, 1997, to 4 elect in writing to terminate membership in Tier 1 and elect to 5 become a qualified participant in Tier 2. An election made by a 6 member under this subsection is irrevocable. The retirement 7 system shall accept written elections under this subsection from 8 members during the period beginning on January 2, 1998 and ending 9 on May 31, 1998. A member who does not make a written election 10 or who does not file the election during the period specified in 11 this subsection continues to be a member of Tier 1.ASUBJECT 12 TO SECTION 701A, A member who makes and files a written election 13 under this subsection elects to do all of the following: 14 (a) Cease to be a member of Tier 1 effective 12 midnight 15 June 30, 1998. 16 (b) Become a qualified participant in Tier 2 effective 12:01 17 a.m., July 1, 1998. 18 (c) Except as otherwise provided in this subdivision, waive 19 all of his or her rights to a pension, an annuity, a retirement 20 allowance, an insurance benefit, or any other benefit under Tier 21 1 effective 12 midnight June 30, 1998. This subdivision does not 22 affect a person's right to health benefits provided under this 23 act pursuant to section 719. 24 (2) If an individual who was a vested former member on March 25 30, 1997, or an individual who was a former nonvested member on 26 March 30, 1997 becomes a judge or state official and is again 27 eligible for membership in Tier 1, the individual shall elect in 06353'98 9 1 writing to remain a member of Tier 1 or to terminate membership 2 in Tier 1 and become a qualified participant in Tier 2. An elec- 3 tion made by a vested former member or a former nonvested member 4 under this subsection is irrevocable. The retirement system 5 shall accept written elections under this subsection from a 6 vested former member or a former nonvested member during the 7 period beginning on the date of the individual's eligibility for 8 membership and ending upon the expiration of 60 days after the 9 date of that eligibility. A vested former member or former non- 10 vested member who makes and files a written election to remain a 11 member of Tier 1 retains all rights and is subject to all condi- 12 tions as a member of Tier 1 under this act. A vested former 13 member or former nonvested member who does not make a written 14 election or who does not file the election during the period 15 specified in this subsection continues to be a member of Tier 1. 16ASUBJECT TO SECTION 701A, A vested former member or former 17 nonvested member who makes and files a written election to termi- 18 nate membership in Tier 1 elects to do all of the following: 19 (a) Cease to be a member of Tier 1 effective 12 midnight on 20 the last day of the payroll period that includes the date of the 21 election. 22 (b) Become a qualified participant in Tier 2 effective 12:01 23 a.m. on the first day of the payroll period immediately following 24 the date of the election. 25 (c) Except as otherwise provided in this subdivision, waive 26 all of his or her rights to a pension, an annuity, a retirement 27 allowance, an insurance benefit, or any other benefit under Tier 06353'98 10 1 1 effective 12 midnight on the last day of the payroll period 2 that includes the date of the election. This subdivision does 3 not affect an individual's right to health benefits provided 4 under this act pursuant to section 719. 5 (3) THIS SUBSECTION APPLIES TO AN INDIVIDUAL WHO WAS A 6 VESTED MEMBER OF TIER 1 ON MARCH 30, 1997 AND WHO TERMINATES THE 7 EMPLOYMENT UPON WHICH THAT MEMBERSHIP IS BASED AFTER JANUARY 1, 8 1998 BUT ON OR BEFORE JUNE 30, 1998. BEFORE THE TERMINATION OF 9 HIS OR HER EMPLOYMENT, AN INDIVIDUAL DESCRIBED IN THIS SUBSECTION 10 MAY ELECT IN WRITING TO TERMINATE MEMBERSHIP IN TIER 1 AND BECOME 11 A QUALIFIED PARTICIPANT IN TIER 2. AN ELECTION MADE BY A MEMBER 12 UNDER THIS SUBSECTION IS IRREVOCABLE. THE RETIREMENT SYSTEM 13 SHALL ACCEPT WRITTEN ELECTIONS UNDER THIS SUBSECTION FROM A 14 MEMBER DURING THE PERIOD BEGINNING ON JANUARY 2, 1998 AND ENDING 15 ON JUNE 30, 1998. A MEMBER DESCRIBED IN THIS SUBSECTION WHO DOES 16 NOT MAKE A WRITTEN ELECTION OR WHO DOES NOT FILE THE ELECTION 17 BEFORE THE TERMINATION OF HIS OR HER EMPLOYMENT CONTINUES TO BE A 18 MEMBER OR VESTED FORMER MEMBER OF TIER 1. A MEMBER WHO MAKES AND 19 FILES A WRITTEN ELECTION UNDER THIS SUBSECTION TO TERMINATE MEM- 20 BERSHIP IN TIER 1 ELECTS TO DO ALL OF THE FOLLOWING: 21 (A) CEASE TO BE A MEMBER OF TIER 1 AND BECOME A QUALIFIED 22 PARTICIPANT IN TIER 2 EFFECTIVE 12 MIDNIGHT ON THE DAY IMMEDI- 23 ATELY PRECEDING THE DATE OF THE TERMINATION OF EMPLOYMENT. 24 (B) BECOME A FORMER QUALIFIED PARTICIPANT IN TIER 2 EFFEC- 25 TIVE 12:01 A.M. ON THE DAY IMMEDIATELY FOLLOWING THE DATE 26 DESCRIBED IN SUBDIVISION (A). 06353'98 11 1 (C) EXCEPT AS OTHERWISE PROVIDED IN THIS SUBDIVISION, WAIVE 2 ALL OF HIS OR HER RIGHTS TO A PENSION, AN ANNUITY, A RETIREMENT 3 ALLOWANCE, AN INSURANCE BENEFIT, OR ANY OTHER BENEFIT UNDER TIER 4 1 EFFECTIVE 12 MIDNIGHT ON THE DATE DESCRIBED IN SUBDIVISION 5 (A). THIS SUBDIVISION DOES NOT AFFECT AN INDIVIDUAL'S RIGHT TO 6 HEALTH BENEFITS PROVIDED UNDER THIS ACT PURSUANT TO SECTION 719. 7 (4)(3)After consultation with the retirement system's 8 actuary and the retirement board, the department of management 9 and budget shall determine the method by which a member, vested 10 former member, or former nonvested member shall make a written 11 election under this section. If the member, vested former 12 member, or former nonvested member is married at the time of the 13 election, the election is not effective unless the election is 14 signed by the individual's spouse. However, the retirement board 15 may waive this requirement if the spouse's signature cannot be 16 obtained because of extenuating circumstances. 17 (5)(4)An election under this section is subject to the 18 eligible domestic relations order act, 1991 PA 46, MCL 38.1701 to 19 38.1711. 20 (6)(5)If the department of management and budget 21 receives notification from the United States internal revenue 22 service that this section or any portion of this section will 23 cause the retirement system to be disqualified for tax purposes 24 under the internal revenue code, then the portion that will cause 25 the disqualification does not apply. 26 SEC. 701A. (1) A MEMBER WHO MAKES AND FILES A WRITTEN 27 ELECTION UNDER SECTION 701(1) OR AN INDIVIDUAL WHO MAKES AND 06353'98 12 1 FILES A WRITTEN ELECTION UNDER SECTION 701(2) SHALL AT THE TIME 2 OF THAT ELECTION ALSO MAKE AN ELECTION TO DO 1 OF THE FOLLOWING: 3 (A) TO HAVE 100% OF HIS OR HER SALARY THAT IS PAID BOTH 4 DIRECTLY AND INDIRECTLY BY THIS STATE FOR THE POSITION HE OR SHE 5 HOLDS BE CONSIDERED HIS OR HER SALARY IN TIER 2. 6 (B) TO HAVE THE PORTION OF HIS OR HER SALARY THAT IS CONSID- 7 ERED COMPENSATION UNDER TIER 1 ON THE DAY BEFORE HIS OR HER ELEC- 8 TION CONTINUE TO BE THE PORTION THAT IS CONSIDERED HIS OR HER 9 SALARY IN TIER 2. 10 (2) A MEMBER OR INDIVIDUAL WHO DOES NOT MAKE THE ELECTION 11 DESCRIBED IN SUBSECTION (1) AT THE TIME HE OR SHE MAKES THE ELEC- 12 TION UNDER SECTION 701(1) OR (2) IS CONSIDERED TO HAVE MADE THE 13 ELECTION DESCRIBED IN SUBSECTION (1)(B). AN ELECTION MADE BY A 14 MEMBER OR INDIVIDUAL UNDER THIS SECTION IS IRREVOCABLE. 15 Sec. 702. (1) For a member who elects to terminate member- 16 ship in Tier 1 under section 701(1), the retirement system shall 17 direct the state treasurer to transfer a lump sum amount from the 18 appropriate fund created under this act to the qualified 19 participant's account in Tier 2 on or before October 31, 1998. 20 The retirement system shall calculate the amount to be trans- 21 ferred, which shall be equal to the sum of the following: 22 (a) The member's accumulated contributions, if any, from the 23 reserve for member contributions as of 12 midnight June 30, 24 1998. 25 (b) For a member who is vested under section 501(1) as of 12 26 midnight on June 30, 1998, the excess, if any, of the actuarial 27 present value of the member's accumulated benefit obligation, 06353'98 13 1 over the amount specified in subdivision (a), from the reserve 2 for employer contributions. Except as provided in subsection 3(5)(7), for the purposes of this subsection, the present value 4 of the member's accumulated benefit obligation is based upon the 5 member's estimated credited service and estimated final salary as 6 of 12 midnight on June 30, 1998. The actuarial present value 7 shall be computed as of 12 midnight June 30, 1998 and shall be 8 based on the following: 9 (i) Eight percent effective annual interest, compounded 10 annually. 11 (ii) A 50% male and 50% female gender neutral blend of the 12 mortality tables used to project retirant longevity in the most 13 recent actuarial valuation report. 14 (iii) A benefit commencement age, based upon the member's 15 estimated credited service as of 12 midnight June 30, 1998. The 16 benefit commencement age shall be the younger of the following, 17 but shall not be younger than the member's age as of 12 midnight 18 June 30, 1998: 19 (A) Age 60. 20 (B) Age 55, if the member's estimated credited service 21 equals or exceeds 18 years. 22 (C) The member's age, if the member's estimated credited 23 service equals or exceeds 25 years. 24 (c) Interest on any amounts determined in subdivisions (a) 25 and (b), from July 1, 1998 to the date of the transfer, based 26 upon 8% annual interest, compounded annually. 06353'98 14 1 (2) For each member who elects to terminate membership in 2 the retirement system under section 701(1), the retirement system 3 shall recompute the amount transferred under subsection (1) not 4 later than December 31, 1998 based upon the member's actual cred- 5 ited service and actual final salary as of 12 midnight June 30, 6 1998. If the recomputed amount differs from the amount trans- 7 ferred under subsection (1) by $10.00 or more, not later than 8 January 15, 1999, the retirement system shall do all of the 9 following: 10 (a) Direct the state treasurer to transfer from the reserve 11 for employer contributions to the qualified participant's account 12 in Tier 2 the excess, if any, of the recomputed amount over the 13 previously transferred amount together with interest from 12 mid- 14 night June 30, 1998 to the date of the transfer under this sub- 15 section, based upon 8% effective annual interest, compounded 16 annually. 17 (b) Direct the state treasurer to transfer from the quali- 18 fied participant's account in Tier 2 to the reserve for employer 19 contributions the excess, if any, of the previously transferred 20 amount over the recomputed amount, together with interest, from 21 the date of the transfer made under subsection (1), based upon 8% 22 effective annual interest, compounded annually. 23 (3) For a vested former member who elects to terminate mem- 24 bership in this retirement system under section 701(2), the 25 retirement system shall direct the state treasurer to transfer a 26 lump sum amount from the appropriate fund created under this act 27 to the qualified participant's account in Tier 2 on or before the 06353'98 15 1 expiration of 60 days after the date of the individual's 2 termination of employment. The retirement system shall calculate 3 the amount to be transferred, which shall be equal to the sum of 4 the following: 5 (a) The vested former member's accumulated contributions, if 6 any, from the reserve for member contributions as of 12 midnight 7 on the last day of the payroll period that includes the date of 8 the election. 9 (b) The excess, if any, of the actuarial present value of 10 the vested former member's accumulated benefit obligation, over 11 the amount specified in subdivision (a), from the reserve for 12 employer contributions. Except as provided in subsection(5)13 (7), for the purposes of this subsection, the present value of 14 the vested former member's accumulated benefit obligation is 15 based upon the vested former member's estimated credited service 16 and estimated final salary as of 12 midnight on the last day of 17 the payroll period that includes the date of the election. The 18 actuarial present value shall be computed as of 12 midnight on 19 that date and shall be based on the following: 20 (i) Eight percent effective annual interest, compounded 21 annually. 22 (ii) A 50% male and 50% female gender neutral blend of the 23 mortality tables used to project retirant longevity in the most 24 recent annual actuarial valuation report. 25 (iii) A benefit commencement age, based upon the member's 26 estimated credited service as of 12 midnight on the last day of 27 the payroll period that includes the date of the election. The 06353'98 16 1 benefit commencement age shall be the younger of the following, 2 but shall not be younger than the member's age as of 12 midnight 3 on the last day of the payroll period that includes the date of 4 the election: 5 (A) Age 60. 6 (B) Age 55, if the vested former member's estimated credited 7 service equals or exceeds 18 years. 8 (C) The vested former member's age, if the vested former 9 member's estimated credited service equals or exceeds 25 years. 10 (c) Interest on any amounts determined in subdivisions (a) 11 and (b), from the first day of the payroll period immediately 12 following the date of the election to the date of the transfer, 13 based upon 8% effective annual interest, compounded annually. 14 (4) For each vested former member who elects to terminate 15 membership in Tier 1 under section 701(2), the retirement system 16 shall recompute the amount transferred under subsection (3) not 17 later than the expiration of 90 days after the transfer occurs 18 under subsection (3) based upon the vested former member's actual 19 credited service and actual final salary as of 12 midnight on the 20 last day of the payroll period that includes the date of the 21 election. If the recomputed amount differs from the amount 22 transferred under subsection (3) by $10.00 or more, the retire- 23 ment system shall do all of the following: 24 (a) Direct the state treasurer to transfer from the reserve 25 for employer contributions to the qualified participant's account 26 in Tier 2 the excess, if any, of the recomputed amount over the 27 previously transferred amount together with interest from 12 06353'98 17 1 midnight on the last day of the payroll period that includes the 2 date of the election to the date of the transfer under this sub- 3 section, based upon 8% effective annual interest, compounded 4 annually. 5 (b) Direct the state treasurer to transfer from the quali- 6 fied participant's account in Tier 2 to the reserve for employer 7 contributions the excess, if any, of the previously transferred 8 amount over the recomputed amount, together with interest, from 9 the date of the transfer made under subsection (3), based upon 8% 10 effective annual interest, compounded annually. 11 (5) FOR A MEMBER WHO ELECTS TO TERMINATE MEMBERSHIP IN THIS 12 RETIREMENT SYSTEM UNDER SECTION 701(3), THE RETIREMENT SYSTEM 13 SHALL DIRECT THE STATE TREASURER TO TRANSFER A LUMP SUM AMOUNT 14 FROM THE APPROPRIATE FUND CREATED UNDER THIS ACT TO THE FORMER 15 QUALIFIED PARTICIPANT'S ACCOUNT IN TIER 2 ON OR BEFORE THE EXPI- 16 RATION OF 60 DAYS AFTER THE DATE OF THE INDIVIDUAL'S TERMINATION 17 OF EMPLOYMENT. THE RETIREMENT SYSTEM SHALL CALCULATE THE AMOUNT 18 TO BE TRANSFERRED, WHICH SHALL BE EQUAL TO THE SUM OF THE 19 FOLLOWING: 20 (A) THE MEMBER'S ACCUMULATED CONTRIBUTIONS, IF ANY, FROM THE 21 RESERVE FOR MEMBER CONTRIBUTIONS AS OF 12 MIDNIGHT ON THE DAY 22 IMMEDIATELY PRECEDING THE DATE OF THE TERMINATION OF EMPLOYMENT. 23 (B) THE EXCESS, IF ANY, OF THE ACTUARIAL PRESENT VALUE OF 24 THE MEMBER'S ACCUMULATED BENEFIT OBLIGATION, OVER THE AMOUNT 25 SPECIFIED IN SUBDIVISION (A), FROM THE RESERVE FOR EMPLOYER 26 CONTRIBUTIONS. EXCEPT AS PROVIDED IN SUBSECTION (7), FOR THE 27 PURPOSES OF THIS SUBSECTION, THE PRESENT VALUE OF THE MEMBER'S 06353'98 18 1 ACCUMULATED BENEFIT OBLIGATION IS BASED UPON THE MEMBER'S 2 ESTIMATED CREDITED SERVICE AND ESTIMATED FINAL SALARY AS OF 12 3 MIDNIGHT ON THE DAY IMMEDIATELY PRECEDING THE DATE OF THE TERMI- 4 NATION OF EMPLOYMENT. THE ACTUARIAL PRESENT VALUE SHALL BE COM- 5 PUTED AS OF 12 MIDNIGHT ON THAT DATE AND SHALL BE BASED ON THE 6 FOLLOWING: 7 (i) EIGHT PERCENT EFFECTIVE ANNUAL INTEREST, COMPOUNDED 8 ANNUALLY. 9 (ii) A 50% MALE AND 50% FEMALE GENDER NEUTRAL BLEND OF THE 10 MORTALITY TABLES USED TO PROJECT RETIRANT LONGEVITY IN THE MOST 11 RECENT ANNUAL ACTUARIAL VALUATION REPORT. 12 (iii) A BENEFIT COMMENCEMENT AGE, BASED UPON THE MEMBER'S 13 ESTIMATED CREDITED SERVICE AS OF 12 MIDNIGHT ON THE DAY IMMEDI- 14 ATELY PRECEDING THE DATE OF THE TERMINATION OF EMPLOYMENT. THE 15 BENEFIT COMMENCEMENT AGE SHALL BE THE YOUNGER OF THE FOLLOWING, 16 BUT SHALL NOT BE YOUNGER THAN THE MEMBER'S AGE AS OF 12 MIDNIGHT 17 ON THE DAY IMMEDIATELY PRECEDING THE DATE OF THE TERMINATION OF 18 EMPLOYMENT: 19 (A) AGE 60. 20 (B) AGE 55, IF THE MEMBER'S ESTIMATED CREDITED SERVICE 21 EQUALS OR EXCEEDS 18 YEARS. 22 (C) THE AGE OF THE MEMBER IF THE MEMBER'S ESTIMATED CREDITED 23 SERVICE EQUALS OR EXCEEDS 25 YEARS. 24 (C) INTEREST ON ANY AMOUNTS DETERMINED IN SUBDIVISIONS (A) 25 AND (B), FROM THE DAY IMMEDIATELY FOLLOWING THE DATE DESCRIBED IN 26 SUBDIVISION (A) TO THE DATE OF THE TRANSFER, BASED UPON 8% 27 EFFECTIVE ANNUAL INTEREST, COMPOUNDED ANNUALLY. 06353'98 19 1 (6) FOR EACH MEMBER WHO ELECTS TO TERMINATE MEMBERSHIP IN 2 TIER 1 UNDER SECTION 701(3), THE RETIREMENT SYSTEM SHALL RECOM- 3 PUTE THE AMOUNT TRANSFERRED UNDER SUBSECTION (5) NOT LATER THAN 4 THE EXPIRATION OF 90 DAYS AFTER THE TRANSFER OCCURS UNDER SUBSEC- 5 TION (5) BASED UPON THE MEMBER'S ACTUAL CREDITED SERVICE AND 6 ACTUAL FINAL SALARY AS OF 12 MIDNIGHT ON THE DAY IMMEDIATELY PRE- 7 CEDING THE DATE OF THE TERMINATION OF EMPLOYMENT. IF THE RECOM- 8 PUTED AMOUNT DIFFERS FROM THE AMOUNT TRANSFERRED UNDER SUBSECTION 9 (5) BY $10.00 OR MORE, THE RETIREMENT SYSTEM SHALL DO ALL OF THE 10 FOLLOWING: 11 (A) DIRECT THE STATE TREASURER TO TRANSFER FROM THE RESERVE 12 FOR EMPLOYER CONTRIBUTIONS TO THE FORMER QUALIFIED PARTICIPANT'S 13 ACCOUNT IN TIER 2 THE EXCESS, IF ANY, OF THE RECOMPUTED AMOUNT 14 OVER THE PREVIOUSLY TRANSFERRED AMOUNT TOGETHER WITH INTEREST 15 FROM 12 MIDNIGHT ON THE DAY IMMEDIATELY PRECEDING THE DATE OF THE 16 TERMINATION OF EMPLOYMENT TO THE DATE OF THE TRANSFER UNDER THIS 17 SUBSECTION, BASED UPON 8% EFFECTIVE ANNUAL INTEREST, COMPOUNDED 18 ANNUALLY. 19 (B) DIRECT THE STATE TREASURER TO TRANSFER FROM THE FORMER 20 QUALIFIED PARTICIPANT'S ACCOUNT IN TIER 2 TO THE RESERVE FOR 21 EMPLOYER CONTRIBUTIONS THE EXCESS, IF ANY, OF THE PREVIOUSLY 22 TRANSFERRED AMOUNT OVER THE RECOMPUTED AMOUNT, TOGETHER WITH 23 INTEREST, FROM THE DATE OF THE TRANSFER MADE UNDER SUBSECTION 24 (5), BASED UPON 8% EFFECTIVE ANNUAL INTEREST, COMPOUNDED 25 ANNUALLY. 26 (7)(5)For the purposes of subsections (1) to(4)(6), 27 the calculation of estimated and actual present value of the 06353'98 20 1 member's or vested former member's accumulated benefit obligation 2 shall be based upon methods adopted by the department of manage- 3 ment and budget and the retirement system's actuary in consulta- 4 tion with the retirement board. The retirement system shall uti- 5 lize the same actuarial valuation report used to calculate the 6 amount transferred under subsection (1),or(3), OR (5) when 7 making the recomputation required under subsection (2),or(4), 8 OR (6). Estimated and actual final salary shall be determined as 9 provided in section 105(4) as of 12 midnight on the date the 10 member or deferred member ceases to be a member of Tier 1 under 11 section 701. 12 (8)(6)For a former nonvested member who elects to termi- 13 nate membership in Tier 1 under section 701(2) and who has accu- 14 mulated contributions standing to his or her credit in the 15 reserve for member contributions, the retirement system shall 16 direct the state treasurer to transfer a lump sum amount from the 17 reserve for member contributions created under section 210 to the 18 qualified participant's account in Tier 2 on or before the expi- 19 ration of 60 days after the date of the individual's election to 20 terminate membership. The retirement system shall calculate the 21 amount to be transferred, which shall be equal to the sum of the 22 following: 23 (a) The former nonvested member's accumulated contributions, 24 if any, from the reserve for member contributions as of 12 mid- 25 night on the last day of the payroll period that includes the 26 date of the election. 06353'98 21 1 (b) Interest on any amounts determined in subdivision (a), 2 from the first day of the payroll period immediately following 3 the date of the election to the date of the transfer, based upon 4 8% effective annual interest, compounded annually. 5 (9)(7)If the department of management and budget 6 receives notification from the United States internal revenue 7 service that this section or any portion of this section will 8 cause the retirement system to be disqualified for tax purposes 9 under the internal revenue code, then the portion that will cause 10 the disqualification does not apply. 11 Sec. 705. (1) "Employer" meansthe qualified participant's12reporting unitTHIS STATE. 13 (2) "Former qualified participant" means an individual who 14 was a qualified participant and who terminates the employment 15 upon which his or her participation is based for any reason. 16 (3) "Health benefit dependent" means the qualified or former 17 qualified participant's spouse, if any, and an unmarried child 18 who is considered a dependent of the qualified or former quali- 19 fied participant under section 152 of the internal revenue code, 20 if any. 21 Sec. 706. (1) "Qualified participant" means an individual 22 who is a participant of Tier 2 and who meets 1 of the following 23 requirements: 24 (a) An individual who first becomes a judge or state offi- 25 cial on or after March 31, 1997, and whobefore March 31, 199726would have been eligibleDOES NOT ELECT to be a member of Tier 1 27 UNDER SECTION 707A. 06353'98 22 1 (b) An individual who elects to terminate membership in Tier 2 1 and who elects to participate in Tier 2 in the manner pre- 3 scribed in section 701. 4 (2) "Refund beneficiary" means an individual nominated by a 5 qualified participant or a former qualified participant under 6 section 717 to receive a distribution of the participant's accu- 7 mulated balance in the manner prescribed in section 718. 8 (3) "SALARY" MEANS 1 OF THE FOLLOWING: 9 (A) FOR AN INDIVIDUAL DESCRIBED IN SUBSECTION (1)(A), 100% 10 OF HIS OR HER SALARY THAT IS PAID BOTH DIRECTLY AND INDIRECTLY BY 11 THIS STATE FOR THE POSITION HE OR SHE HOLDS. 12 (B) FOR AN INDIVIDUAL DESCRIBED IN SUBSECTION (1)(B), THE 13 SALARY THAT HE OR SHE ELECTS OR IS CONSIDERED TO HAVE ELECTED 14 UNDER SECTION 701A. 15 (4)(3)"State treasurer" means the treasurer of this 16 state. 17 SEC. 707A. (1) AN INDIVIDUAL WHO FIRST BECOMES A JUDGE OR 18 STATE OFFICIAL ON OR AFTER THE EFFECTIVE DATE OF THIS SECTION 19 SHALL ELECT IN WRITING TO BECOME A MEMBER OF TIER 1 OR TO BECOME 20 A QUALIFIED PARTICIPANT IN TIER 2 WITHIN 30 DAYS OF HIS OR HER 21 EMPLOYMENT. AN ELECTION MADE BY AN INDIVIDUAL UNDER THIS SUBSEC- 22 TION IS IRREVOCABLE. AN INDIVIDUAL WHO DOES NOT MAKE A WRITTEN 23 ELECTION OR WHO DOES NOT FILE THE ELECTION DURING THE PERIOD 24 SPECIFIED IN THIS SUBSECTION IS CONSIDERED TO HAVE ELECTED TO 25 BECOME A MEMBER OF TIER 1. 26 (2) THE RETIREMENT SYSTEM SHALL PROVIDE AN OPPORTUNITY FOR 27 EACH QUALIFIED PARTICIPANT WHO IS A QUALIFIED PARTICIPANT ON THE 06353'98 23 1 EFFECTIVE DATE OF THIS SECTION TO ELECT IN WRITING TO TERMINATE 2 PARTICIPATION IN TIER 2 AND ELECT TO BECOME A MEMBER IN TIER 1. 3 AN ELECTION MADE BY A QUALIFIED PARTICIPANT UNDER THIS SUBSECTION 4 IS IRREVOCABLE. THE RETIREMENT SYSTEM SHALL ACCEPT WRITTEN ELEC- 5 TIONS UNDER THIS SUBSECTION FROM QUALIFIED PARTICIPANTS DURING 6 THE PERIOD BEGINNING ON THE EFFECTIVE DATE OF THIS SECTION AND 7 ENDING UPON THE EXPIRATION OF 60 DAYS AFTER THE EFFECTIVE DATE OF 8 THIS SECTION. A QUALIFIED PARTICIPANT WHO DOES NOT MAKE A WRIT- 9 TEN ELECTION OR WHO DOES NOT FILE THE ELECTION DURING THE PERIOD 10 SPECIFIED IN THIS SUBSECTION CONTINUES TO BE A QUALIFIED PARTICI- 11 PANT OF TIER 2. A QUALIFIED PARTICIPANT WHO MAKES AND FILES A 12 WRITTEN ELECTION UNDER THIS SUBSECTION ELECTS TO DO ALL OF THE 13 FOLLOWING: 14 (A) CEASE TO BE A MEMBER OF TIER 2 EFFECTIVE 12 MIDNIGHT ON 15 THE DAY BEFORE THE FIRST DAY OF THE PAYROLL PERIOD THAT FOLLOWS 16 THE EXPIRATION OF 90 DAYS AFTER THE EFFECTIVE DATE OF THIS 17 SECTION. 18 (B) BECOME A MEMBER OF TIER 1 EFFECTIVE 12:01 A.M. ON THE 19 FIRST DAY OF THE PAYROLL PERIOD DESCRIBED IN SUBDIVISION (A). 20 (C) WAIVE ALL OF HIS OR HER RIGHTS TO A BENEFIT UNDER TIER 2 21 ON THE DATE HE OR SHE BECOMES A MEMBER OF TIER 1. 22 (3) AFTER CONSULTATION WITH THE RETIREMENT SYSTEM'S ACTUARY 23 AND THE RETIREMENT BOARD, THE DEPARTMENT OF MANAGEMENT AND BUDGET 24 SHALL DETERMINE THE METHOD BY WHICH AN INDIVIDUAL SHALL MAKE A 25 WRITTEN ELECTION UNDER THIS SECTION. IF THE INDIVIDUAL IS MAR- 26 RIED AT THE TIME OF THE ELECTION, THE ELECTION IS NOT EFFECTIVE 27 UNLESS THE ELECTION IS SIGNED BY THE INDIVIDUAL'S SPOUSE. 06353'98 24 1 HOWEVER, THE RETIREMENT BOARD MAY WAIVE THIS REQUIREMENT IF THE 2 SPOUSE'S SIGNATURE CANNOT BE OBTAINED BECAUSE OF EXTENUATING 3 CIRCUMSTANCES. 4 (4) AN ELECTION UNDER THIS SECTION IS SUBJECT TO THE ELIGI- 5 BLE DOMESTIC RELATIONS ORDER ACT, 1991 PA 46, MCL 38.1701 TO 6 38.1711. 7 (5) IF THE DEPARTMENT OF MANAGEMENT AND BUDGET RECEIVES 8 NOTIFICATION FROM THE UNITED STATES INTERNAL REVENUE SERVICE THAT 9 THIS SECTION OR ANY PORTION OF THIS SECTION WILL CAUSE THE 10 RETIREMENT SYSTEM TO BE DISQUALIFIED FOR TAX PURPOSES UNDER THE 11 INTERNAL REVENUE CODE, THEN THE PORTION THAT WILL CAUSE THE DIS- 12 QUALIFICATION DOES NOT APPLY. 13 (6) FOR A QUALIFIED PARTICIPANT WHO ELECTS TO TERMINATE PAR- 14 TICIPATION IN TIER 2 UNDER SUBSECTION (2), THE RETIREMENT SYSTEM 15 SHALL DIRECT THE STATE TREASURER TO TRANSFER THE QUALIFIED 16 PARTICIPANT'S ACCUMULATED BALANCE TO THE APPROPRIATE RESERVE CRE- 17 ATED UNDER THIS ACT ON OR BEFORE THE EXPIRATION OF 120 DAYS AFTER 18 THE EFFECTIVE DATE OF THIS SECTION. THE RETIREMENT SYSTEM SHALL 19 CALCULATE THE AMOUNT TO BE TRANSFERRED, WHICH SHALL BE EQUAL TO 20 THE SUM OF THE FOLLOWING: 21 (A) THE PORTION OF THE PARTICIPANT'S ACCUMULATED BALANCE 22 ATTRIBUTABLE TO EMPLOYEE CONTRIBUTIONS AND EARNINGS ON THOSE CON- 23 TRIBUTIONS, IF ANY, AS OF THE DAY OF TRANSFER, TO THE RESERVE FOR 24 MEMBER CONTRIBUTIONS. 25 (B) THE PORTION OF THE PARTICIPANT'S ACCUMULATED BALANCE 26 ATTRIBUTABLE TO EMPLOYER CONTRIBUTIONS AND EARNINGS ON THOSE 06353'98 25 1 CONTRIBUTIONS, IF ANY, AS OF THE DAY OF TRANSFER, TO THE RESERVE 2 FOR EMPLOYER CONTRIBUTIONS. 3 Sec. 711. (1) A qualified participant shall not participate 4 in any other public sector retirement benefits plan for simulta- 5 neous service rendered to the same public sector employer. THIS 6 SUBSECTION DOES NOT APPLY TO A QUALIFIED PARTICIPANT WHO MAKES 7 THE ELECTION UNDER SECTION 701A(1)(B) FOR THAT PORTION OF HIS OR 8 HER COMPENSATION THAT IS NOT CONSIDERED SALARY FOR THE PURPOSES 9 OF TIER 2. Except as otherwise provided in this act,or by the10state treasurer,this section does not prohibit a qualified par- 11 ticipant from participating in a retirement plan established 12 UNDER THE INTERNAL REVENUE CODE by this state or other public 13 sector employer.under the internal revenue code.14 (2) A QUALIFIED PARTICIPANT CONSENTS AS A CONDITION OF PAR- 15 TICIPATION IN TIER 2 THAT HE OR SHE SHALL NOT RECEIVE A RETIRE- 16 MENT ALLOWANCE OR OTHER BENEFIT FROM ANY OTHER PUBLIC SECTOR 17 RETIREMENT BENEFITS PLAN WHILE HOLDING THE POSITION THAT QUALI- 18 FIES HIM OR HER FOR PARTICIPATION IN TIER 2 AND THE OTHER PLAN. 19 A QUALIFIED PARTICIPANT WHO RECEIVES A RETIREMENT ALLOWANCE IN 20 VIOLATION OF THIS SUBSECTION FORFEITS HIS OR HER RIGHT TO 21 EMPLOYER CONTRIBUTIONS UNDER SECTION 714. THE EMPLOYER OF A 22 QUALIFIED PARTICIPANT WHO VIOLATES THIS SUBSECTION SHALL IMMEDI- 23 ATELY SUSPEND EMPLOYER CONTRIBUTIONS UNDER SECTION 714. A QUALI- 24 FIED PARTICIPANT WHO IS A CONTRIBUTING MEMBER IN A LOCAL PUBLIC 25 SECTOR RETIREMENT BENEFITS PLAN ON THE DAY BEFORE HE OR SHE 26 BECOMES A QUALIFIED PARTICIPANT IN TIER 2 AND WHO DOES NOT HAVE A 27 VESTED RIGHT TO A RETIREMENT BENEFIT UNDER THAT PLAN ON THAT DATE 06353'98 26 1 MAY WITHDRAW THE CONTRIBUTIONS MADE BY THAT PARTICIPANT TO THE 2 LOCAL PLAN WITHOUT VIOLATING THIS SUBSECTION. THIS SUBSECTION 3 DOES NOT APPLY TO A FORMER QUALIFIED PARTICIPANT. 4 (3) A PUBLIC SECTOR RETIREMENT BENEFITS PLAN SHALL NOT USE 5 THIS SECTION OR AN ELECTION MADE BY AN INDIVIDUAL UNDER SECTION 6 701 TO AFFECT, ALTER, OR DIMINISH THAT INDIVIDUAL'S RIGHT TO 7 HEALTH CARE BENEFITS OR A VESTED RIGHT TO A RETIREMENT BENEFIT 8 FOR SERVICE AS A JUDGE PROVIDED BY THAT PLAN AS OF THE DAY BEFORE 9 HE OR SHE BECOMES A QUALIFIED PARTICIPANT IN TIER 2. 10 SEC. 718A. (1) A QUALIFIED PARTICIPANT WHO HAS 8 OR MORE 11 YEARS OF CREDITED SERVICE AND WHO IS PHYSICALLY OR MENTALLY 12 TOTALLY DISABLED TO PERFORM HIS OR HER DUTIES AS DETERMINED IN 13 THE MANNER PRESCRIBED IN SECTION 507 SHALL BE GRANTED A SUPPLE- 14 MENTAL BENEFIT EQUIVALENT TO THE AMOUNT PROVIDED FOR IN SECTION 15 507 AS IF THE FORMER QUALIFIED PARTICIPANT HAD RETIRED UNDER THAT 16 SECTION. IF A QUALIFIED PARTICIPANT WHO HAS 8 OR MORE YEARS OF 17 CREDITED SERVICE DIES WHILE IN OFFICE, A SUPPLEMENTAL BENEFIT 18 EQUIVALENT TO THE AMOUNT PROVIDED FOR IN SECTION 508 SHALL BE 19 GRANTED TO A SURVIVOR DESCRIBED IN SECTION 508, IN THE MANNER 20 PRESCRIBED IN THAT SECTION. THE RETIREMENT SYSTEM SHALL OFFSET A 21 SUPPLEMENTAL BENEFIT PROVIDED UNDER THIS SECTION BY THE VALUE OF 22 THE DISTRIBUTION OF THE FORMER QUALIFIED PARTICIPANT'S OR 23 DECEASED QUALIFIED PARTICIPANT'S ACCUMULATED BALANCE PURSUANT TO 24 SECTION 718. 25 (2) A FORMER QUALIFIED PARTICIPANT OR BENEFICIARY OF A 26 DECEASED QUALIFIED PARTICIPANT WHO IS ELIGIBLE FOR A SUPPLEMENTAL 27 BENEFIT UNDER SUBSECTION (1) IS ELIGIBLE FOR HEALTH INSURANCE 06353'98 27 1 COVERAGE UNDER SECTION 509 IN ALL RESPECTS AND UNDER THE SAME 2 TERMS AS WOULD BE A RETIRANT AND HIS OR HER BENEFICIARIES UNDER 3 TIER 1, BUT ONLY IF THE FORMER QUALIFIED PARTICIPANT OR DECEASED 4 QUALIFIED PARTICIPANT WOULD HAVE BEEN ELIGIBLE FOR HEALTH INSUR- 5 ANCE COVERAGE HAD HE OR SHE BEEN A MEMBER OF TIER 1. 6 Enacting section 1. This amendatory act does not take 7 effect unless House Bill No. 5807 of the 89th Legislature is 8 enacted into law. 06353'98 Final page. KKR