March 29, 2007, Introduced by Senators GLEASON, CLARKE, CLARK-COLEMAN, BASHAM, OLSHOVE, BRATER, PRUSI, CHERRY, SCOTT, HUNTER, WHITMER, BARCIA and THOMAS and referred to the Committee on Appropriations.
A bill to amend 1943 PA 240, entitled
"State employees' retirement act,"
by amending sections 1i, 13, and 55 (MCL 38.1i, 38.13, and 38.55),
sections 1i and 55 as amended by 2004 PA 33 and section 13 as
amended by 2002 PA 743, and by adding section 61a.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1i. (1) "Service" means service rendered to this state by
an elected or appointed state official or employee of this state.
Credit for service shall be determined by appropriate rules and
regulations of the retirement board, but not more than 1 year of
service shall be creditable for all service in 1 calendar year. The
retirement board shall not allow credit for service for any period
of more than 1 month in any 1 calendar year during which the
employee was absent without pay. However, full service credit shall
be given for a period during which an employee is on leave of
absence and is receiving worker's compensation benefits as the
result of a duty-incurred disability. Full service credit shall
also be given to an employee for required 1-day layoffs, for
voluntary or involuntary participation in pay reduction plan A, pay
reduction plan B, or both, in effect during the fiscal years ending
on and after September 30, 1981, for required and designated
temporary layoffs, and, beginning October 1, 2003, for furlough
hours, and for participation in the banked leave time program.
(2) "State treasurer" means the treasurer of this state.
(3) "Tier 1" means the retirement plan available to a member
under this act who meets 1 of the following requirements:
(a) The member was first employed and entered upon the payroll
before
March 31, 1997 and who he or she does not elect to
become a
qualified participant of Tier 2.
(b) The member was first employed and entered upon the payroll
on or after March 31, 1997 and he or she elects to become a member
of Tier 1 under section 61a.
(4) "Tier 2" means the retirement plan established pursuant to
section 401(k) of the internal revenue code that is available to
qualified participants under sections 50 to 69.
Sec. 13. (1) Except as otherwise provided in this act,
membership in the retirement system consists of state employees
occupying permanent positions in the state civil service. All state
employees except those specifically excluded by law and those who
are members or eligible to be members of other statutory retirement
systems in this state, shall become members of the retirement
system. The employees may use service previously performed as an
employee of this state in meeting the service requirements for the
retirement allowances and death benefits provided by the retirement
system. However, the prior service shall not be used in computing
the amount of a retirement allowance to be paid by the retirement
system unless the employee pays to the retirement system the amount
the employee's contributions would have been had the employee
become a member immediately upon employment by the state with
interest compounded annually at the regular rate from a date 1 year
after the date of employment by this state to the date of payment.
A person who draws compensation as a state employee of a political
subdivision of this state is eligible for the benefits provided by
this act to the extent of the person's compensation paid by this
state. An individual who meets the requirements of section 44a is a
member of the retirement system.
(2) Elected or appointed state officials may elect not to
become or continue as members of the retirement system by filing
written notice with the retirement board. An appointed state
official who is a member of a state board, commission, or council
and who receives a per diem rate in his or her capacity as a member
of the board, commission, or council is excluded from membership in
the retirement system for the service rendered in his or her
capacity as a member of the board, commission, or council. Service
performed by an elected or appointed official during the time the
official elects not to participate shall not be used in meeting the
service requirement or in computing the amount of retirement
allowance to be paid by the retirement system. A member who elects
not to participate shall be refunded all contributions made before
the election.
(3) Membership in the retirement system does not include any
of the following:
(a) A person who is a contributing member in the public school
employees' retirement system provided for in the public school
employees retirement act of 1979, 1980 PA 300, MCL 38.1301 to
38.1408.
(b) A person who is a contributing member in the Michigan
judges retirement system provided for in the judges retirement act
of 1992, 1992 PA 234, MCL 38.2101 to 38.2670.
(c) A person who comes within the Michigan state police
retirement system provided for in the state police retirement act
of 1986, 1986 PA 182, MCL 38.1601 to 38.1648.
(d) An individual who is first employed and entered upon the
payroll on or after March 31, 1997 for employment for which the
individual would have been eligible for membership under this
section before March 31, 1997 unless that individual elects to
becomes a member of Tier 1 under section 61a. An individual
described in this subdivision who does not make the election to
become a member of Tier 1 is eligible to be a qualified participant
in Tier 2 subject to sections 50 to 69.
(e) Except as provided in section 19g, an individual who
elects to terminate membership under section 50 and who, but for
that election, would otherwise be eligible for membership in Tier 1
under this section.
(f) A retirant who again becomes employed by the state and is
entered upon the payroll on or after December 1, 2002, for
employment for which the retirant would have been eligible for
membership under this section before December 1, 2002. A retirant
described in this subdivision shall be a qualified participant in
Tier 2 subject to sections 50 to 69.
(4) A person who is hired in state classified or unclassified
service after June 30, 1974, who is first employed and entered upon
the payroll before March 31, 1997, and who possesses a Michigan
teaching certificate shall be a member of this retirement system.
After June 30, 1974, but before March 31, 1997, a person who
returns to state employment in the classified or unclassified
service who previously was a contributing member of the Michigan
public school employees' retirement system shall have the person's
accumulated contributions and service transferred to this
retirement system, or having withdrawn the contributions, may pay
into the retirement system the amount withdrawn together with
regular interest and have credit restored as provided for in
section 16. On and after March 31, 1997, an individual described in
this subsection who returns to state service shall make an
irrevocable election to remain in Tier 1 or to become a qualified
participant of Tier 2 in the manner prescribed in section 50.
(5) A person, not regularly employed by this state, who is
employed through participation in 1 or more of the following
programs, shall not be a member of the retirement system and shall
not receive service credit for the employment:
(a) A program authorized, undertaken, and financed pursuant to
the comprehensive employment and training act of 1973, former
Public Law 93-203, 87 Stat. 839.
(b) A summer youth employment program established pursuant to
the Michigan youth corps act, 1983 PA 69, MCL 409.221 to 409.229.
(c) A program established pursuant to the job training
partnership act, Public Law 97-300, 96 Stat. 1322.
(d) A program established pursuant to the Michigan opportunity
and skills training program, first established under sections 12 to
23 of 1983 PA 259.
(e) A program established pursuant to the Michigan community
service corps program, first established under sections 25 to 35 of
1983 PA 259.
(6) A person, not regularly employed by this state, who is
employed to administer a program described in subsection (5) shall
not be a member of the retirement system and shall not receive
service credit for the employment.
(7) If a person described in subsection (5)(a) later becomes a
member of this retirement system within 12 months after the date of
termination as a participant in a transitional public employment
program, service credit shall be given for employment which is
excluded in subsection (5) for purposes of determining a retirement
allowance upon the payment by the person's employer under
subsection (5) from funds provided under the comprehensive
employment and training act of 1973, former Public Law 93-203, 87
Stat. 839, as funds permit, to the retirement system of the
contributions, plus regular interest, the employer would have paid
had the employment been rendered in a position covered by this act.
During the person's employment in the transitional public
employment program, the person's employer shall place in reserve a
reasonable but not necessarily an actuarially determined amount
equal to the contributions that the employer would have paid to the
retirement system for those employees in the transitional public
employment program as if they were members under this act, but only
for that number of employees that the employer determined would
move from the transitional public employment program into positions
covered by this act. If the funds provided under the comprehensive
employment and training act of 1973, former Public Law 93-203, 87
Stat. 839, are insufficient, the remainder of the employer
contributions shall be paid by the person's current employer.
(8) For purposes of section 19g, a former member shall be
considered a member and shall be considered to have satisfied the
requirements of section 19g(1)(c) and (2)(c) if the former member
was employed by the department formerly known as the department of
mental health on January 1, 1996 and went on layoff status before
January 1, 1997.
Sec. 55. (1) "Plan document" means the document that contains
the provisions and procedures of Tier 2 in conformity with this act
and the internal revenue code.
(2) "Qualified participant" means an individual who is a
participant of Tier 2 and who meets 1 of the following
requirements:
(a) An individual who is first employed and entered upon the
payroll of his or her employer on or after March 31, 1997, and who
before
March 31, 1997 would have been eligible to be a member of
Tier
1 does not elect to become a
member of Tier 1 under section
61a.
(b) An individual who elects to terminate membership in Tier 1
and who elects to participate in Tier 2 in the manner prescribed in
section 50.
(3) "Refund beneficiary" means an individual nominated by a
qualified participant or a former qualified participant under
section 66 to receive a distribution of the participant's
accumulated balance in the manner prescribed in section 67.
(4) "State treasurer" means the treasurer of this state.
(5) Except as otherwise provided in this subsection, "year of
service" means each period during which a qualified participant is
employed by the employer and is credited with 2,080 hours of
service. The Tier 2 plan administrator and the plan document may
provide for a lesser number of annual hours and a maximum number of
hours per pay period for any classification of employees, provided
that no participant shall receive credit for more than 1 year of
service for any 12-month period of employment. Beginning January 1,
2003, full service credit shall also be given to a participant for
furlough hours, for required 1-day layoffs, for required and
designated temporary layoffs, for a year in which a participant
temporarily leaves employment to enter active military duty and
then dies during that active military duty, and for participation
in the banked leave time program. In the event a terminated
participant is reemployed, such individual shall retain credit for
all full and partial years of service completed prior to such
reemployment, for purposes of determining his or her vesting
percentage in any employer contributions made pursuant to section
63(2) and (3) after his or her reemployment.
Sec. 61a. (1) An individual who is first employed and entered
upon the payroll of his or her employer on or after the effective
date of this section shall elect in writing to become a member of
Tier 1 or to become a qualified participant in Tier 2 within 30
days after his or her employment. An election made by an individual
under this subsection is irrevocable. An individual who does not
make a written election or who does not file the election during
the period specified in this subsection is considered to have
elected to become a qualified participant of Tier 2.
(2) The retirement system shall provide an opportunity for
each qualified participant who is a qualified participant on the
effective date of the amendatory act that added this section to
elect in writing to terminate participation in Tier 2 and elect to
become a member in Tier 1. An election made by a qualified
participant under this subsection is irrevocable. The retirement
system shall accept written elections under this subsection from
qualified participants during the period beginning on the effective
date of the amendatory act that added this section and ending upon
the expiration of 60 days after the effective date of the
amendatory act that added this section. A qualified participant who
does not make a written election or who does not file the election
during the period specified in this subsection continues to be a
qualified participant of Tier 2. A qualified participant who makes
and files a written election under this subsection elects to do all
of the following:
(a) Cease to be a member of Tier 2 effective 12 midnight on
the day before the first day of the payroll period that follows the
expiration of 90 days after the effective date of the amendatory
act that added this section.
(b) Become a member of Tier 1 effective 12:01 a.m. on the
first day of the payroll period described in subdivision (a).
(c) Waive all of his or her rights to a benefit under Tier 2
on the date he or she becomes a member of Tier 1.
(3) After consultation with the retirement system's actuary
and the retirement board, the department of management and budget
shall determine the method by which an individual shall make a
written election under this section. If the individual is married
at the time of the election, the election is not effective unless
the election is signed by the individual's spouse. However, the
retirement board may waive this requirement if the spouse's
signature cannot be obtained because of extenuating circumstances.
(4) An election under this section is subject to the eligible
domestic relations order act, 1991 PA 46, MCL 38.1701 to 38.1711.
(5) 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.
(6) For a qualified participant who elects to terminate
participation in Tier 2 under subsection (2), the retirement system
shall direct the state treasurer to transfer the qualified
participant's accumulated balance to the appropriate fund created
under section 11 on or before the expiration of 120 days after the
effective date of the amendatory act that added this section. The
retirement system shall calculate the amount to be transferred,
which shall be equal to the sum of the following:
(a) The portion of the participant's accumulated balance
attributable to employee contributions and earnings on those
contributions, if any, as of the date of transfer, to the
employee's savings fund.
(b) The portion of the participant's accumulated balance
attributable to employer contributions and earnings on those
contributions, if any, as of the date of transfer, to the
employer's accumulation fund.