September 22, 2005, Introduced by Senator HAMMERSTROM and referred to the Committee on Government Operations.
A bill to amend 1957 PA 261, entitled
"Michigan legislative retirement system act,"
by amending sections 23b, 24, 26, 28, 30, 59a, and 79 (MCL
38.1023b, 38.1024, 38.1026, 38.1028, 38.1030, 38.1059a, and
38.1079), section 23b as amended by 1996 PA 486, section 24 as
amended by 1987 PA 58, sections 26, 30, and 59a as amended by 2002
PA 97, section 28 as amended by 1981 PA 123, and section 79 as
amended by 1998 PA 501.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 23b. (1) Notwithstanding section 18 and except as
otherwise provided in subsection (4), if a retirant or a deferred
vested member again becomes a legislator or lieutenant governor,
the retirant or deferred vested member shall not again become a
member unless within 30 days from the date of the beginning of the
subsequent service he or she files with the board a written notice
of election to again become a member and complies with this
section. After the expiration of the 30-day period, a retirant or
deferred vested member who again becomes a legislator or lieutenant
governor who does not elect to again become a member is barred from
again becoming a member during that term of office. During the 30-
day period, the retirement allowance shall not be paid, but the
contributions required by this act shall be deducted. The
contributions shall be refunded if the legislator or lieutenant
governor does not elect to again become a member.
(2) If the retirant or deferred vested member elects to again
become a member, the subsequent membership in the retirement system
shall be subject to the following conditions in addition to any
other condition required of a member by this act:
(a) During the subsequent period of service as a legislator or
lieutenant governor, payment of the retirement allowance shall not
be made or accrued.
(b) The member shall repay to the retirement system all money
received from the retirement system with interest at the rate of 6%
per annum compounded annually before the expiration of 180 days of
the term for which the member currently is elected. Failure to make
the repayment within 180 days shall void the election to become a
member.
(c) All prior applications for retirement shall be abrogated.
(d) The member's service credit shall be recalculated.
(3) If a retirant or deferred vested member again becomes a
legislator or lieutenant governor and declines to again become a
member, he or she shall not be entitled to a retirement allowance
and payment of his or her retirement allowance shall not be made or
accrued during his or her subsequent service. Upon termination of
his or her subsequent service, payment of the retirement allowance
shall be resumed effective as of the date of termination of the
subsequent service without change because of the subsequent
service.
(4) This section does not apply to a deferred vested member
who is required to make an election under section 61.
Sec. 24. (1) Unless otherwise provided by the member pursuant
to this act, the surviving spouse of a deceased member, deferred
vested member, or retirant having the service qualifications
required by section 23 shall be entitled to receive a survivor's
retirement allowance for life payable from the survivors'
retirement fund. The survivor's retirement allowance shall be
payable beginning on the day after the date of death of the member
or deferred vested member, or beginning in the month after the
month of death in the case of a retirant. If an eligible child or
children also survive the member, deferred vested member, or
retirant, and the child or children are under the care of the
eligible surviving spouse, the survivor's retirement allowance
shall begin as of the day after the date of death of the member or
deferred vested member or the month after the month of death in the
case of a retirant, without regard to whether the surviving spouse
has attained 55 years of age. The benefits to an eligible child or
children shall continue whether or not the surviving spouse
remarries. If the eligible child or children, or any of them, are
not under the care of the eligible surviving spouse, at the
specific designation of the deceased member, deferred vested
member, or retirant as provided in this act, a survivor's
retirement allowance shall begin for the benefit of the eligible
child or children as of the day after the date of death of the
member or deferred vested member, or beginning in the month after
the month of death in the case of a retirant. A deduction from the
monthly survivor's retirement allowance shall not be made for any
fraction of a month remaining at the time of a survivor's death or
becoming ineligible.
(2) The survivor's retirement allowance shall be equal to 66-
2/3% of the retirement allowance which the deceased member,
deferred vested member, or retirant had earned on the date of
death, as a member, deferred vested member, or retirant. If an
eligible survivor, regardless of age, has in his or her care an
eligible child or children of the deceased member, deferred vested
member, or retirant, the survivor's retirement allowance shall be
75% of the retirement allowance, but when all the children have
become ineligible, the survivor's retirement allowance shall be 66-
2/3% of the retirement allowance.
(3) An adopted child of a member for the purposes of this act
shall have the same status as a natural child of a member.
(4) If there is not a surviving spouse but an eligible child
exists, or if an eligible child survives a surviving spouse, then
the survivor's retirement allowance otherwise payable to the
surviving spouse shall be paid in equal parts to each eligible
child until the child becomes ineligible, and the total of the
survivor's retirement allowance paid to any other child shall not
be diminished because of the attainment of ineligible age,
marriage, or death of an eligible child. The portion of the
survivor's retirement allowance that was paid to a formerly
eligible child who subsequently becomes ineligible shall be paid in
equal parts among the remaining eligible children, if any, until no
eligible children remain to be paid.
(5) Marriage or attainment of ineligible age, whichever occurs
first, shall render a child of a member, deferred vested member, or
retirant ineligible for further consideration in the payment of a
survivor's retirement allowance or in the increase in the amount of
the survivor's retirement allowance under this act.
(6) If the deceased member, deferred vested member, or
retirant is survived by an eligible child or children who are not
under the care of an eligible surviving spouse and if the deceased
member, deferred vested member, or retirant has filed a written
designation with the board, the survivor's retirement allowance or
a part of it shall be paid to or for the benefit of the eligible
child or children in the shares and in the manner as provided in
the written designation. The deceased member, deferred vested
member, or retirant may provide in the written designation that
payment of all or any part of the survivor's retirement allowance
to a surviving spouse not having the care of all of the eligible
children shall be deferred until the children become ineligible.
(7) If there is not a written designation by a member,
deferred vested member, or retirant, and if the surviving spouse is
not the biological parent of an eligible child or children, the
survivor's retirement allowance shall be divided equally among the
eligible survivors.
(8) Unless designated by a member, deferred vested member, or
retirant, when an eligible child or all of the eligible children
become ineligible, the surviving spouse at the time of the member,
deferred vested member, or retirant's death shall receive the
entire survivor's retirement allowance.
Sec.
26. (1) Beginning January 1,
1999, the The retirement
system shall be administered by a board of trustees. A member of
the board of trustees serving as of December 31, 2006 shall
continue to serve as a member until December 31, 2007. Beginning
January 1, 2008, the board of trustees shall be composed as
indicated
in the bylaws. , consisting of 11
persons as follows:
(a)
Two members of the house of representatives appointed by
the
speaker of the house of representatives.
(b)
Two members of the senate, appointed in the same manner as
members
of standing committees of the senate are appointed.
(c)
Two retirants appointed by the speaker of the house of
representatives
and 2 retirants appointed by the senate majority
leader.
(d)
One deferred vested member appointed by the speaker of the
house
of representatives and 1 deferred vested member appointed by
the
senate majority leader. If a deferred vested member serving on
the
board becomes a retirant during his or her term of office, he
or
she shall be entitled to serve the remainder of his or her term
of
office.
(e)
One participant of Tier 2 who was a former member of Tier
1
appointed in 1999 by the senate majority leader and beginning in
2001
appointed alternately by the speaker of the house of
representatives
and the senate majority leader. However, if there
is
no participant of Tier 2 who meets the former member requirement
of
this subdivision, then 1 additional deferred vested member
appointed
in the manner prescribed in this subdivision.
(2)
Only members of the retirement system are eligible to
serve
as members on the board of trustees except for the retirants
and
Tier 2 participant authorized under subsection (1). Board
members
appointed under subsection (1)(a) and (b) are appointed for
2-year
terms. Board members appointed under subsection (1)(c) are
appointed
for 4-year terms. Board members appointed for terms
beginning
in 1999 under subsection (1)(d) are appointed for 2-year
terms.
Board members appointed for terms beginning in 2001 under
subsection
(1)(d) are appointed for 4-year terms. A board member
appointed
for a term beginning in 1999 under subsection (1)(e) is
appointed
for a 2-year term. Beginning in 2001, a board member
appointed
under subsection (1)(e) is appointed for a 4-year term.
For
terms beginning on or after January
1, 1999, board members
appointed
under subsection (1)(c), (d), or (e) shall not serve as a
board
member under those subdivisions for a combined total of more
than
8 years.
(3)
Each person, whether appointed as a trustee or becoming a
trustee
ex officio, shall take an oath of office before the
secretary
of state, clerk of the house, or secretary of the senate,
and,
upon taking the oath, qualifies as a trustee. The oath of
office
shall be as prescribed under section 1 of article XI of the
state
constitution of 1963.
Sec.
28. A Beginning January 1, 2008, a vacancy in a
trusteeship
shall be filled for the unexpired term in the same
manner
as original appointments are made as provided in the
bylaws.
Sec. 30. Each trustee is entitled to 1 vote on any action of
the
board and at least 6 concurring votes of a majority of board
members are necessary for any action by the board at a meeting. A
decision or action shall not become effective, unless presented and
so approved by the action of the board. A trustee shall not vote by
proxy, but shall be present at the meeting in order to have his or
her vote recorded.
Sec. 59a. (1) This section is enacted pursuant to section
401(a) of the internal revenue code, 26 USC 401(a), 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 board of trustees shall
administer the retirement system to fulfill this intent.
(2)
Except as otherwise provided in this section, employer-
financed
benefits provided by the retirement system under this act
shall
not exceed the lesser of $90,000.00 or 100% of the member's
average
compensation for high 3 years as described in section
415(b)(3)
of the internal revenue code for retirement occurring at
age
62 or older.
(3)
The limitation on employer financed benefits provided by
the
retirement system under subsection (2) applies unless
application
of subsections (4) and (5) produces a higher
limitation,
in which case the higher limitation applies.
(4)
If a member retires before age 62, the amount of
$90,000.00
in subsection (2) is actuarially reduced to reflect
payment
before age 62. The retirement system shall use an interest
rate
of 5% per year compounded annually to calculate the actuarial
reduction
in this subsection. If this subsection produces a
limitation
of less than $75,000.00 at age 55, the limitation at age
55
is $75,000.00 and the limitations for ages under age 55 shall be
calculated
from a limitation of $75,000.00 at age 55.
(5)
Section 415(d) of the internal revenue code requires the
commissioner
of internal revenue to adjust the $90,000.00
limitation
in subsection (2) to reflect cost of living increases,
beginning
with calendar year 1988. This subsection shall be
administered
using the limitations applicable to each calendar year
as
adjusted by the commissioner of internal revenue under section
415(d)
of the internal revenue code. The retirement system shall
adjust
the benefits subject to the limitation each year to conform
with
the adjusted limitation.
(2) Notwithstanding any other provision of this act, the
retirement system 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 governmental plans. Employer-
financed benefits provided by the retirement system under this act
shall not exceed the applicable limitations of 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(d), to reflect cost of living increases, and the
retirement system shall adjust the benefits 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(b), 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.
(3) (6)
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) (7)
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) (8)
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.
(6) (9)
If the retirement system is
terminated, the interest
of the members, deferred vested 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(d)(3), and related internal
revenue service regulations applicable to governmental plans.
(7) (10)
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 board of trustees, 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.
(8) (11)
For purposes of determining
actuarial equivalent
retirement allowances under this act, the actuarially assumed
interest rate shall be 7% with utilization of the 1971 group
annuity and mortality table.
(12)
Notwithstanding any other provision of this section, the
retirement
system shall be administered in compliance with the
provisions
of section 415 of the internal revenue code and revenue
service
regulations under this section that are applicable to
governmental
plans. If there is a conflict between this section and
another
section of this or any other act of this state, this
section
prevails.
(9) (13)
Notwithstanding any other
provision of this act,
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(a)(17), 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) (14)
Notwithstanding any other
provision of this act,
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. This subsection applies to all qualified military service on
or after December 12, 1994.
Sec. 79. (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 health
benefits under section 75(2).
(b) The former qualified participant meets 1 of the following
requirements:
(i) He or she meets or exceeds the benefit commencement age
employed in the actuarial present value calculation under section
62 and the service requirements that would have applied to that
former participant under Tier 1 for receiving health insurance
coverage under section 50b, if that former participant was a member
of Tier 1.
(ii) He or she is 55 years of age or older.
(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 50b. , or in another plan as provided in subsection
(6).
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
to begin at the death of the deceased former qualified participant
in the manner prescribed in this section.
(3) Except as otherwise provided in subsection (6), an
individual who elects health insurance coverage under this section
shall become a member of a health insurance coverage group
authorized pursuant to section 50b.
(4) For a former qualified participant who is eligible to
elect health insurance coverage under subsection (1) and who is
vested in those benefits under section 75(2)(a) or (c), 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 90% of the
payments for health insurance coverage under section 50b. If the
individual elects the health insurance coverage provided under
section 50b, this state shall transfer its portion of the amount
calculated under this subsection to the health insurance fund
created by section 22c.
(5) For a former qualified participant who is eligible to
elect health insurance coverage under subsection (1) and who is
vested in those benefits under section 75(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 50b. If the individual elects the
health insurance coverage provided under section 50b, the state
shall transfer its portion of the amount calculated under this
subsection to the health insurance fund created by section 22c.
(6)
A former qualified participant or health benefit dependent
who
is eligible to elect health insurance coverage under this
section
and who elects health insurance coverage under a different
plan
than the plan authorized under section 50b may elect to have
an
amount up to the amount of the retirement system's share of the
monthly
health insurance premium subsidy provided in this section
paid
by the retirement system directly to the other health
insurance
plan or to a medical savings account established pursuant
to
section 220 of the internal revenue code, to the extent allowed
by
law or under the provisions and procedures of Tier 2.
(6) (7)
If the department of 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.