SB-1227, As Passed House, April 27, 2010

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 1227

A bill to amend 1980 PA 300, entitled

"The public school employees retirement act of 1979,"

by amending sections 4, 6, 7, 8, 41, 42, 61, and 91 (MCL 38.1304,

38.1306, 38.1307, 38.1308, 38.1341, 38.1342, 38.1361, and 38.1391),

section 4 as amended by 2008 PA 354, sections 6 and 7 as amended by

1995 PA 272, section 8 as amended by 1997 PA 143, section 41 as

amended by 2007 PA 15, section 42 as amended by 1996 PA 268,

section 61 as amended by 2006 PA 158, and section 91 as amended by

2007 PA 110, and by adding sections 43e, 81b, and 92a.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 4. (1) "Compound interest" means interest compounded

annually on July 1 on the contributions on account as of the

previous July 1 and computed at the rate of investment return

determined under section 104a(1) for the last completed state

fiscal year.

(2) "Contributory service" means credited service other than

noncontributory service.

(3) "Deferred member" means a member who has ceased to be a

public school employee and has satisfied the requirements of

section 82 for a deferred vested service retirement allowance.

(4) "Department" means the department of technology,

management, and budget.

(5) "Designated date" means September 30, 2006.

(6) "Direct rollover" means a payment by the retirement system

to the eligible retirement plan specified by the distributee.

(7) "Distributee" includes a member or deferred member.

Distributee also includes the member's or deferred member's

surviving spouse or the member's or deferred member's spouse or

former spouse under an eligible domestic relations order, with

regard to the interest of the spouse or former spouse.

(8) Beginning January 1, 2002, except as otherwise provided in

this subsection, "eligible retirement plan" means 1 or more of the

following:

(a) An individual retirement account described in section

408(a) of the internal revenue code, 26 USC 408.

(b) An individual retirement annuity described in section

408(b) of the internal revenue code, 26 USC 408.

internal revenue code, 26 USC 403.

(d) A qualified trust described in section 401(a) of the

internal revenue code, 26 USC 401.

(e) An annuity contract described in section 403(b) of the

internal revenue code, 26 USC 403.

(f) An eligible plan under section 457(b) of the internal

revenue code, 26 USC 457, which is maintained by a state, political

subdivision of a state, or an agency or instrumentality of a state

or political subdivision of a state and which agrees to separately

account for amounts transferred into such eligible plan under

section 457(b) of the internal revenue code, 26 USC 457, from this

retirement system, that accepts the distributee's eligible rollover

distribution. However, in the case of an eligible rollover

distribution to a surviving spouse, an eligible retirement plan

means an individual retirement account or an individual retirement

annuity described above.

(g) Beginning January 1, 2008, except as otherwise provided in

this subsection, "eligible retirement plan" means a Roth individual

retirement account as described in section 408A of the internal

revenue code, 26 USC 408A.

(9) Beginning January 1, 2007, "eligible rollover

distribution" means a distribution of all or any portion of the

balance to the credit of the distributee. Eligible rollover

distribution does not include any of the following:

(a) A distribution made for the life or life expectancy of the

distributee or the joint lives or joint life expectancies of the

distributee and the distributee's designated beneficiary.

(b) A distribution for a specified period of 10 years or more.

required under section 401(a)(9) of the internal revenue code, 26

USC 401.

(d) The portion of any distribution that is not includable in

federal gross income, except to the extent such portion of the

distribution is paid to any of the following:

(i) An individual retirement account or annuity described in

section 408(a) or 408(b) of the internal revenue code, 26 USC 408.

(ii) A qualified plan described in section 401(a) of the

internal revenue code, 26 USC 401, or an annuity contract described

in section 403(b) of the internal revenue code, 26 USC 403, and the

plan providers agree to separately account for the amounts paid,

including any portion of the distribution that is includable in

federal gross income, and the portion of the distribution which is

not so includable.

(10) "Employee organization professional services leave" or

"professional services leave" means a leave of absence that is

renewed annually by the reporting unit so that a member may accept

a position with a public school employee organization to which he

or she belongs and which represents employees of a reporting unit

in employment matters. The member shall be included in membership

of the retirement system during a professional services leave if

all of the conditions of section 71(5) and (6) are satisfied.

(11) "Employee organization professional services released

time" or "professional services released time" means a portion of

the school fiscal year during which a member is released by the

reporting unit from his or her regularly assigned duties to engage

in employment matters for a public school employee organization to

which he or she belongs. The member's compensation received or

service rendered, or both, as applicable, by a member while on

professional services released time shall be reportable to the

retirement system if all of the conditions of section 71(5) and (6)

are satisfied.

(12) "Final average compensation" means the aggregate amount

of a member's compensation earned within the averaging period in

which the aggregate amount of compensation was highest divided by

the member's number of years, including any fraction of a year, of

credited service during the averaging period. The averaging period

shall be 36 consecutive calendar months if the member contributes

to the member investment plan; otherwise, the averaging period

shall be 60 consecutive calendar months. The member may select the

calendar months utilized in the calculation by notifying the

retirement system on a form and in the manner provided by the

retirement system. If the member has less than 1 year of credited

service in the averaging period, the number of consecutive calendar

months in the averaging period shall be increased to the lowest

number of consecutive calendar months that contains 1 year of

credited service.

(13) "Health benefits" means hospital, medical-surgical, and

sick care benefits and dental, vision, and hearing benefits for

retirants, retirement allowance beneficiaries, and health insurance

dependents provided pursuant to section 91.

(14) "Internal revenue code" means the United States internal

revenue code of 1986.

(15) "Long-term care insurance" means group insurance that is

authorized by the retirement system for retirants, retirement

allowance beneficiaries, and health insurance dependents, as that

term is defined in section 91, to cover the costs of services

provided to retirants, retirement allowance beneficiaries, and

health insurance dependents, from nursing homes, assisted living

facilities, home health care providers, adult day care providers,

and other similar service providers.

(16) "Member investment plan" means the program of member

contributions described in section 43a.

Sec. 6. (1) "Original member" means a member employed in

Michigan public schools before July 1, 1945.

(2) "Out of system public education service" means service

performed in public education meeting 1 or more of the following

requirements:

(a) Performed in other states in the United States or its

territorial possessions.

(b) Performed at the university of Michigan, Michigan state

university, Wayne state university, Grand Valley state university,

Oakland university, or Saginaw Valley university.

a juvenile training school operated by a county in this state.

(d) Service purchased before January 31, 1991 and performed in

a community mental health service program operated under former ~~Act~~

~~No. 54 of the Public Acts of 1963~~ 1963 PA 54 for the severely

mentally retarded in day care programs, day training programs, or

day care training programs that were transferred to an intermediate

school district by direction of the department of education.

(e) Service purchased before January 31, 1991 and performed as

an elementary or secondary teacher at a United States armed forces

military base in the United States or a foreign country.

(f) Service purchased before January 31, 1991 and performed as

a teacher or administrator of American nationals in overseas public

elementary or secondary schools operated by the United States

department of defense.

(g) Performed by a person who first becomes employed by an

institution of higher education described in section 4, 5, or 6 of

article VIII of the state constitution of 1963 on or after January

1, 1996.

(3) "Prior service" means service performed before July 1,

1945.

~~(4) Except as otherwise provided in this subsection, "public~~

~~school academy" means a public school academy established under~~

~~part 6a or 6b of the school code of 1976, Act No. 451 of the Public~~

~~Acts of 1976, being sections 380.501 to 380.507 and 380.511 to~~

~~380.518 of the~~ ~~Michigan~~ ~~Compiled Laws. Public school academy does~~

~~not include any of the following:~~

~~(a) A public school academy operated by a state public~~

~~university that is not subject to the optional retirement act of~~

~~1967, Act No. 156 of the Public Acts of 1967, being sections 38.381~~

~~to 38.388 of the~~ ~~Michigan~~ ~~Compiled Laws.~~

~~(b) A public school academy corporation formed by a state~~

~~public university that is not subject to Act No. 156 of the Public~~

~~Acts of 1967.~~

(4) "Public school academy" means that term as defined in

section 5 of the revised school code, 1976 PA 451, MCL 380.5.

(5) Except as otherwise provided in this subsection, "public

school employee" means an employee of a public local school

district, intermediate school district, public school academy, tax

supported community or junior college, eastern Michigan university,

central Michigan university, northern Michigan university, western

Michigan university, Ferris state university, Michigan

technological university, Lake Superior state university, or

district library as defined in section 69g if the conditions in

section 69g(1) are met for that employee. Service at Michigan

technological university shall be creditable only if the amount of

the accumulated contributions in the state employees' retirement

system created by the state employees' retirement act, ~~Act No. 240~~

~~of the Public Acts of 1943, being sections 38.1 to 38.48 of the~~

~~Michigan Compiled Laws~~ 1943 PA 240, MCL 38.1 to 38.69, for service

is paid to the retirement system. Service at Ferris state

university shall be creditable as prior service or membership

service only if the employee was employed at Ferris state

university on a full-time basis for 2 or more years after May 17,

1949. Until January 1, 1988, public school employee also includes a

person holding a Michigan teacher certificate and serving as an

employee of the Michigan high school athletic association, other

than a person whose effective date of employment with the Michigan

high school athletic association is on or after December 31, 1986.

Public school employee includes a public school employee on an

approved leave of absence. Public school employee does not include

a person who first becomes employed by a university described in

this subsection on or after January 1, 1996. Beginning July 1,

2010, public school employee shall include all persons working at a

reporting unit who are employed by an entity other than a reporting

unit but shall not include a person employed for limited

professional service such as an attorney or architect. Public

school employee does not include any public school academy employee

who receives retirement benefits under the optional retirement

program pursuant to the optional retirement act of 1967, 1967 PA

156, MCL 38.381 to 38.388.

Sec. 7. (1) "Refund beneficiary" means 1 or more persons whom

the member or former member nominates in writing and files with the

retirement system for the purpose of being paid accumulated

contributions in the event of the death of the member or former

member. If a valid nomination is not on file, the retirement board

shall pay the accumulated contributions to the legal representative

of the deceased member or deceased former member, if any, or to the

estate of the deceased member or deceased former member.

(2) "Regular interest" means interest at 1 or more rates per

annum determined by the retirement board and compounded annually.

The regular interest for amounts on deposit in the reserve for

employee contributions as provided in section 43e shall be

determined and credited in the same manner as the interest on

amounts in the reserve for the member investment plan under section

33.

(3) Except as otherwise provided in this subsection,

"reporting unit" means a public school district, intermediate

school district, public school academy, tax supported community or

junior college, or university, or an agency having employees on its

payroll who are members of this retirement system. The reporting

unit shall be the employer for purposes of this act. On and after

January 1, 1996, reporting unit does not include a university,

except to the extent that university has employees on its payroll

who are members of this retirement system.

(4) "Retirant" means a member who retires with a retirement

allowance payable from reserves of the retirement system.

(5) "Retirement allowance" means a payment for life or a

temporary period provided for in this act to which a retirant,

retirement allowance beneficiary, or refund beneficiary is

entitled.

(6) "Retirement allowance beneficiary" means a person who is

being paid or has entitlement to the payment of a retirement

allowance in the event of the death of a member, deferred member,

or retirant.

(7) "Retirement board" means the board provided to administer

this retirement system.

(8) "Retirement system" means the Michigan public school

employees' retirement system provided for in this act.

Sec. 8. (1) "Service" means personal service performed as a

public school employee or creditable under this act.

(2) "Simple interest" means interest at 1 or more rates per

annum determined by the retirement board.

(3) "State of Michigan service" means service performed as a

state employee in the classified or unclassified service under the

state employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69.

(4) "Teacher" means a person employed by a reporting unit who

is engaged in teaching, who is engaged in administering and

supervising teaching, or who is under a teacher's contract with a

reporting unit, including, but not limited to, teachers, teaching

assistants, guidance counselors, principals, superintendents, and

other administrators over areas that interact directly with

students.

(5) "Transitional public employment program" means

participation in public service employment programs in the areas of

environmental quality, health care, education, public safety, crime

prevention and control, prison rehabilitation, transportation,

recreation, maintenance of parks, streets, and other public

facilities, solid waste removal, pollution control, housing and

neighborhood improvements, rural development, conservation,

beautification, veterans' outreach, and other fields of human

betterment and community improvement as part of a program of

comprehensive manpower services authorized, undertaken, and

financed under the comprehensive employment and training act of

1973, former Public Law 93-203, 87 Stat. 839.

Sec. 41. (1) The annual level percentage of payroll

contribution rate to finance benefits being provided and to be

provided by the retirement system shall be determined by actuarial

valuation pursuant to subsection (2) upon the basis of the risk

assumptions that the retirement board and the department adopt

after consultation with the state treasurer and an actuary. An

annual actuarial valuation shall be made of the retirement system

in order to determine the actuarial condition of the retirement

system and the required contribution to the retirement system. An

annual actuarial gain-loss experience study of the retirement

system shall be made in order to determine the financial effect of

variations of actual retirement system experience from projected

experience.

(2) ~~The contribution rate for benefits payable in the event of~~

~~the death of a member before retirement or the disability of a~~

~~member shall be computed using a terminal funding method of~~

~~valuation.~~ Except as otherwise provided in this subsection, the

contribution rate for ~~other~~ benefits shall be computed using an

individual projected benefit entry age normal cost method of

valuation. Except as otherwise provided in this section, for the

1995-96 state fiscal year and for each subsequent fiscal year, the

contribution rate for health benefits provided under section 91

shall be computed using a cash disbursement method. For each fiscal

year after the fiscal year in which the actuarial accrued liability

for health benefits under section 91 is at least 100% funded by the

health advance funding subaccount created under section 34(2), the

contribution rate for health benefits provided under section 91

shall be computed using an individual projected benefit entry age

normal cost method of valuation. The contribution rate for service

likely to be rendered in the current year, the normal cost

contribution rate, shall be equal to the aggregate amount of

individual projected benefit entry age normal costs divided by 1%

of the aggregate amount of active members' valuation compensation.

Except as otherwise provided under this subsection, the

contribution rate for unfunded service rendered before the

valuation date, the unfunded actuarial accrued liability

contribution rate, shall be the aggregate amount of unfunded

actuarial accrued liabilities divided by 1% of the actuarial

present value over a period not to exceed 50 years of projected

valuation compensation, where unfunded actuarial accrued

liabilities are equal to the actuarial present value of benefits,

reduced by the actuarial present value of future normal cost

contributions and the actuarial value of assets on the valuation

date. ~~For the 2006-2007 state fiscal year, the contribution rate~~

~~for unfunded service rendered before the valuation date shall be~~

~~equal to 4.5% of the aggregate amount of unfunded actuarial accrued~~

~~liabilities divided by 1% of the actuarial valuation annual~~

~~compensation.~~

(3) Before November 1 of each year, the executive secretary of

the retirement board shall certify to the director of the

department the aggregate compensation estimated to be paid public

school employees for the current state fiscal year.

(4) On the basis of the estimate under subsection (3), the

annual actuarial valuation, and any adjustment required under

subsection (6), the director of the department shall compute the

sum due and payable to the retirement system and shall certify this

amount to the reporting units.

(5) The reporting units shall make payment of the amount

certified under subsection (4) to the director of the department in

12 equal monthly installments.

(6) Not later than 90 days after termination of each state

fiscal year, the executive secretary of the retirement board shall

certify to the director of the department and each reporting unit

the actual aggregate compensation paid to public school employees

during the preceding state fiscal year. Upon receipt of that

certification, the director of the department shall compute any

adjustment required to the amount due to a difference between the

estimated and the actual aggregate compensation and the estimated

and the actual actuarial employer contribution rate. The

difference, if any, shall be paid as provided in subsection (9).

This subsection does not apply in a fiscal year in which a deposit

occurs pursuant to subsection (14).

(7) The director of the department may require evidence of

correctness and may conduct an audit of the aggregate compensation

that the director of the department considers necessary to

establish its correctness.

(8) A reporting unit shall forward employee and employer

social security contributions and reports as required by the

federal old-age, survivors, disability, and hospital insurance

provisions of title II of the social security act, chapter 531, 49

Stat. 620, 42 USC 401 to 405, 406 to 418, 420 to 423, 424a to 426-

1, and 427 to 433.

(9) For an employer of an employee of a local public school

district or an intermediate school district, for differences

occurring in fiscal years beginning on or after October 1, 1993, a

minimum of 20% of the difference between the estimated and the

actual aggregate compensation and the estimated and the actual

actuarial employer contribution rate described in subsection (6),

if any, shall be paid by that employer in the next succeeding state

fiscal year and a minimum of 25% of the remaining difference shall

be paid by that employer in each of the following 4 state fiscal

years, or until 100% of the remaining difference is submitted,

whichever first occurs. For an employer of other public school

employees, for differences occurring in fiscal years beginning on

or after October 1, 1991, a minimum of 20% of the difference

between the estimated and the actual aggregate compensation and the

estimated and the actual actuarial employer contribution rate

described in subsection (6), if any, shall be paid by that employer

in the next succeeding state fiscal year and a minimum of 25% of

the remaining difference shall be paid by that employer in each of

the following 4 state fiscal years, or until 100% of the remaining

difference is submitted, whichever first occurs. In addition,

interest shall be included for each year that a portion of the

remaining difference is carried forward. The interest rate shall

equal the actuarially assumed rate of investment return for the

state fiscal year in which payment is made. This subsection does

not apply in a fiscal year in which a deposit occurs pursuant to

subsection (14).

(10) Beginning on the designated date, all assets held by the

retirement system shall be reassigned their fair market value, as

determined by the state treasurer, as of the designated date, and

in calculating any unfunded actuarial accrued liabilities, any

market gains or losses incurred before the designated date shall

not be considered by the retirement system's actuaries.

(11) Beginning on the designated date, the actuary used by the

retirement board shall assume a rate of return on investments of

8.00% per annum, as of the designated date, which rate may only be

changed with the approval of the retirement board and the director

of the department.

(12) Beginning on the designated date, the value of assets

used shall be based on a method that spreads over a 5-year period

the difference between actual and expected return occurring in each

year after the designated date and such methodology may only be

changed with the approval of the retirement board and the director

of the department.

(13) Beginning on the designated date, the actuary used by the

retirement board shall use a salary increase assumption that

projects annual salary increases of 4%. In addition to the 4%, the

retirement board shall use an additional percentage based upon an

age-related scale to reflect merit, longevity, and promotional

salary increase. The actuary shall use this assumption until a

change in the assumption is approved in writing by the retirement

board and the director of the department.

(14) For fiscal years that begin on or after October 1, 2001,

if the actuarial valuation prepared pursuant to this section

demonstrates that as of the beginning of a fiscal year, and after

all credits and transfers required by this act for the previous

fiscal year have been made, the sum of the actuarial value of

assets and the actuarial present value of future normal cost

contributions exceeds the actuarial present value of benefits, the

amount based on the annual level percent of payroll contribution

rate pursuant to subsections (1) and (2) may be deposited into the

health advance funding subaccount created by section 34.

(15) Notwithstanding any other provision of this act, if the

retirement board establishes an arrangement and fund as described

in section 6 of the public employee retirement benefit protection

act, the benefits that are required to be paid from that fund shall

be paid from a portion of the employer contributions described in

this section or other eligible funds. The retirement board shall

determine the amount of the employer contributions or other

eligible funds that shall be allocated to that fund and deposit

that amount in that fund before it deposits any remaining employer

contributions or other eligible funds in the pension fund.

Sec. 42. (1) Beginning with the 1994-95 state fiscal year, a

reporting unit shall contribute the entire percentage, determined

under section 41(2), of the aggregate annual compensation of all

employees who are members under the noncontributory plan as

provided by section 63 to the reserve for employer contributions

and to the reserve for health benefits. The reporting unit

contribution under this subsection is the exclusive obligation of

the reporting unit payable out of general budget resources of the

reporting unit, including funds available under local millage and

other local resources and from the state school aid allocation to

the reporting unit, and shall not be a separate obligation by

specific reimbursement or otherwise of this state.

(2) As authorized by resolution or other enabling act of its

governing body, the employer shall pick up all contributions of a

member made pursuant to ~~section~~ sections 43a and 43c for all

compensation paid on or after January 1, 1987 and reported to the

retirement system. Although considered contributions of a member

for certain purposes under this act, all contributions picked up

shall be treated as paid by the employer in lieu of contributions

by the employee. Contributions picked up as provided in this

subsection shall be paid from the same source of funds that is used

for paying compensation to the member. The employer may pick up

these contributions by either a reduction to the member's cash

salary, an offset against a future salary increase, or a

combination of a reduction in salary and offset against a future

salary increase. This subsection does not apply, and the employer

shall not deduct, offset, or remit contributions, until the

department receives notification from the United States internal

revenue service that contributions picked up shall not be included

as gross income of the member until they are distributed or made

available to the member, retirant, retirement allowance

beneficiary, or refund beneficiary.

(3) The employer shall deduct from a member's compensation the

contributions for social security provided in ~~Act No. 205 of the~~

~~Public Acts of 1951, being sections 38.851 to 38.871 of the~~

~~Michigan~~ ~~Compiled Laws~~ 1951 PA 205, MCL 38.851 to 38.871.

Contributions shall be made while the member remains a public

school employee. Each reporting unit official shall deduct the

social security contributions from the compensation of each member

for each payroll period after the date the employee becomes a

member. Social security contributions shall be made notwithstanding

that the minimum compensation provided by law is changed. Each

member is considered to have agreed to the contributions prescribed

in this subsection.

(4) Each reporting unit official shall forward member

~~investment plan~~ contributions to the retirement system ~~monthly.~~ on

a schedule and in a manner determined by the retirement system.

(5) Each reporting unit official shall forward the entire

employer contribution required by this act to the retirement system

~~monthly.~~ on a schedule and in a manner determined by the retirement

system.

(6) ~~By January 11, April 11, July 11, and October 11 of each~~

~~year, each reporting unit official shall file with the executive~~

~~secretary of the retirement board a quarterly affidavit for the~~

~~preceding 3 months. The affidavit shall certify the aggregate~~

~~compensation that is reportable to the retirement system under~~

~~section 3a, sources of contributions, wages paid from federal~~

~~funds, and contributions required by law. Not later than July 11 of~~

~~each year, a report shall be filed with the executive secretary of~~

~~the retirement board, which shall list the persons employed,~~

~~together with other information, including salary, service, and~~

~~contributions, required for retirement reporting purposes.~~ Each

reporting unit official shall submit to the retirement system a

report that includes the information for retirement purposes,

including, but not limited to, persons employed, wages, hours, and

contributions required under this act. The report shall contain the

information on a pay period basis and shall be submitted to the

retirement system no later than the last day of the subsequent pay

period. The superintendent for a reporting unit or the chief

administrator for a reporting unit that does not have a

superintendent shall complete an annual certification that gives

authorization for the employees of the reporting unit to report the

Senate Bill No. 1227 (H-9) as amended April 27, 2010

information to the retirement system.

(7) If a reporting unit fails to submit a report or

contributions, or both, according to the schedule established by

the retirement board, a late fee shall be paid by the reporting

unit. If the remittance of contributions is late, the late fee

shall include interest for each day that the remittance of

contributions is late. The retirement board periodically may

establish the late fee, which shall not be less than $25.00, and

interest charges, which shall not be less than 6% per annum. If a

reporting unit fails to correct errors on a report before the

errors are discovered under examination or if such errors are

intentional, the reporting unit shall pay the late fee and interest

charges as described in this subsection for each day that the

report is in error, unless reasonable cause is shown to the

satisfaction of the retirement system.

(8) Upon written notice from the retirement board, the

superintendent of public instruction and the state treasurer shall

withhold payment of state funds, in part or in whole, payable from

the state school aid appropriation or higher education

appropriations to a reporting unit that fails to comply with this

section.

Sec. 43e. (1) [Except as otherwise provided in this section,]

Beginning October 1, 2010, all members shall

contribute 3% of the member's compensation to the appropriate

funding account in the public employee retirement health care

funding act. [For the state fiscal year that begins October 1, 2010,

members whose yearly salary is less than $18,000.00 shall contribute 1.5% of the member's compensation to the appropriate funding account in the public employee retirement health care funding act. For each state fiscal year that begins on or after October 1, 2011, members whose yearly salary is less than $18,000.00 shall contribute 3% of the member's compensation to the appropriate funding account in the public employee retirement health care funding act.] The member contributions shall be deducted by the

employer and remitted as employer contributions to the retirement

system pursuant to section 42. The retirement system shall

determine a method of deducting the contributions provided for in

this section from the compensation of each member for each payroll

and each payroll period.

(2) As used in this act, "funding account" means the

appropriate irrevocable trust created in the public employee

retirement health care funding act for the deposit of funds and the

payment of retirement health care benefits.

Sec. 61. (1) Except as otherwise provided in this section, if

a retirant is receiving a retirement allowance other than a

disability allowance payable under this act or under former 1945 PA

136, on account of either age or years of personal service

performed, or both, and becomes employed by a reporting unit, the

following shall take place:

(a) The retirant shall not be entitled to a new final average

compensation or additional service credit under this retirement

system unless additional service is performed equivalent to 5 or

more years of service credit or, if the retirant has contributed to

the member investment plan, the equivalent of 3 or more years of

service credit. The retirant may elect to have the retirement

allowance recomputed based on the added credit or the final average

compensation resulting from the added service, or both. A

retirement allowance shall not be recomputed until the retirant

pays into the retirement system an amount equal to the retirant's

new final average compensation multiplied by the percentage

determined under section 41(2) for normal cost and unfunded

actuarial accrued liabilities, not including the percentage

required for the funding of health benefits, multiplied by the

total service credit in the period in which the retirant's

additional service was performed.

(b) The retirant's retirement allowance shall be reduced by

the lesser of the amount that the earnings in a calendar year

exceed the amount permitted without a reduction of benefits under

the social security act, chapter 531, 49 Stat. 620, or 1/3 of the

retirant's final average compensation. For purposes of computing

allowable earnings under this subdivision, the final average

compensation shall be increased by 5% for each full year of

retirement.

(2) The retirement system may offset retirement benefits

payable under this act against amounts owed to the retirement

system by a retirant or retirement allowance beneficiary.

(3) Subsection (1) does not apply to a retirant if all of the

following circumstances exist:

(a) The retirant is a former teacher or administrator employed

in a teaching or research capacity by a university that is

considered a reporting unit for the limited purpose described in

section 7(3).

(b) The retirant is not eligible to use any service or

compensation attributable to the employment described in

subdivision (a) for a recomputation of his or her retirement

allowance.

this subsection shall report such employment to the retirement

system by July 1 of each year. The report to be filed shall include

the name of the retirant, the capacity in which the retirant is

employed, and the total annual compensation paid to the retirant.

(4) Until July 1, 2011, subsection (1) does not apply to a

retirant if all of the following circumstances exist:

(a) The retirant is employed by a reporting unit that has an

approved emergency situation, not including a situation caused by a

labor dispute, that necessitates the hiring of a retirant in the

capacity of a teacher, principal, stationary engineer,

administrator, or other category as determined by the

superintendent of public instruction to prevent depriving students

of an education. The chief executive officer or superintendent of

the school district shall include with the written notification

documentation showing that more than 8% of all classes in the

district during the 1998-99 school year are taught by full-time

substitute teachers who are not certificated in the subjects or

grade levels which they teach. Within 30 days after receipt of the

notification and documentation under this subdivision, the

department of education shall notify the chief executive officer or

superintendent and the retirement system of its approval or

disapproval of the emergency situation. If disapproved by the

department of education, this subsection does not apply.

(b) The retirant is employed under an emergency situation

described in subdivision (a) for a period not to exceed 6 years.

compensation attributable to the employment described in

subdivision (a) for a recomputation of his or her retirement

allowance.

(5) ~~On or before~~ ~~July 1, 1999, the~~ The state superintendent of

public instruction shall compile a listing of critical shortage

disciplines. This listing shall be updated annually.

(6) Until July 1, 2011, subsection (1) does not apply to a

retirant if all of the following circumstances exist:

(a) The retirant is employed by a reporting unit that has a

situation, not including a situation caused by a labor dispute,

that necessitates the hiring of a retirant in an area that has been

identified by the state superintendent of public instruction as a

critical shortage discipline pursuant to subsection (5).

(b) The retirant is employed under a situation described in

subdivision (a) for a period not to exceed 6 years.

compensation attributable to the employment described in

subdivision (a) for a recomputation of his or her retirement

allowance.

(7) ~~The provisions of subsections (4) and~~ Subsection (6) shall

only apply for retirants who have been retired for at least 12

months before becoming employed under this section.

(8) Except as provided in subsection (9), a member may retire

without being subject to subsection (1) if the member meets all of

the following:

(a) The member received a minimum total of 1/2 of a year of

service credit granted under section 68 for each of the 5 school

fiscal years immediately preceding the member's retirement

allowance effective date.

(b) The member terminated service as a public school employee

on or after June 15, 2010.

requirement to receive a retirement allowance under this act.

(d) Prior to terminating reporting unit service, the member

may agree to accept a postretirement option position with a

reporting unit that reported wages and hours for the member to the

retirement system for the full school fiscal year immediately

preceding the member's retirement allowance effective date.

(e) The postretirement option position described in

subdivision (d) has a work schedule that meets all of the

following:

(i) A reduction of at least 50% from the member's hours,

excluding overtime, reported to the retirement system in the full

school fiscal year immediately preceding retirement.

(ii) The work schedule commences no later than 3 months

following termination of reporting unit service.

(9) For each fiscal year that begins on or after July 1, 2011,

the superintendent of public instruction and the retirement board

may elect to discontinue postretirement option positions as

described in subsection (8).

(10) Notwithstanding any other provision of this act, a

retirant who otherwise met the requirements of subsection (8) but

exceeds the number of hours worked as provided in subsection

(8)(e)(i) shall be subject to the earnings limitation as provided in

subsection (1).

(11) A reporting unit has the sole discretion to determine if,

and the extent to which, a postretirement option position under

this section will be made available to a terminating member or

retirant.

(12) Postretirement option employment shall be for an initial

period not to exceed 1 school fiscal year. At the end of the

initial and any subsequent period, the reporting unit has the sole

discretion to determine if the offer of a postretirement option

position will be renewed, renewed with modifications, or

terminated. Postretirement option positions may be renewed for up

to 1 school fiscal year at a time, but not to exceed a total of 3

school fiscal years. A retirant may not be employed in a

postretirement option position, or a combination of postretirement

option positions, for a total of more than 3 school fiscal years.

(13) A retirant will not earn any service credit under this

act while employed in a postretirement option position. No change

to a retirant's retirement allowance shall made on account of

employment in a postretirement option position.

(14) Notwithstanding any other provision of this act and

except as provided in this subsection, if a retirant exceeds the

earnings limitation in subsection (1), the retirant shall reimburse

the retirement system an amount equal to the retirant health care

costs paid by the retirement system that is proportionate to the

amount of wages by which he or she exceeded the earnings

limitation, as calculated by the retirement system. This subsection

does not apply to a retirant who is excluded from the application

of subsection (1) based on subsections (3) to (7), or subsection

(8) if the retirant has not exceeded the number of hours worked as

provided in subsection (8)(e)(i).

(15) Notwithstanding any other provision of this act, a

retirant who works at a reporting unit but who is employed by an

entity other than a reporting unit or is an independent contractor

shall reimburse the retirement system an amount equal to the amount

of wages earned by the retirant while working at a reporting unit

multiplied by the contribution rate determined under section 41.

The amounts required under this subsection shall be deducted by,

and paid to, the retirement system from the retirant's monthly

retirement allowance under this act.

Sec. 81b. (1) Notwithstanding section 81, a member may retire

with a retirement allowance computed according to this section if

all of the following apply:

(a) The member files a written application with the retirement

board within the incentivized retirement application period stating

a retirement allowance effective date that is on or after June 15,

2010 but not later than October 1, 2010. A member may withdraw a

written application submitted by a member on or before May 31,

2010. A written application submitted by a member and not withdrawn

on or before May 31, 2010 is irrevocable.

(b) On the last day of the month immediately preceding the

retirement allowance effective date stated in the application, the

member's combined age and length of credited service is equal to or

greater than 80 years or the member is eligible to retire under

this act.

the 6-month period ending May 1, 2010. A member who is on layoff or

on an approved leave of absence status from reporting unit

employment is considered to have met the employment requirement of

this subdivision.

(2) Upon his or her retirement as provided in this section, a

member who retires on or before July 1, 2010 shall receive a

retirement allowance equal to the member's number of years and

fraction of a year of credited service multiplied by 1.7% of the

member's final average compensation calculated on a final average

compensation of $114,000.00 or less. For members whose final

average compensation is greater than $114,000.00, the retirement

allowance shall be calculated so that the member receives a portion

of his or her retirement allowance equal to the member's number of

years and fraction of a year of credited service multiplied by 1.7%

of his or her final average compensation up to a final average

compensation of $114,000.00 and the remaining portion of the

retirement allowance shall be calculated as equal to the member's

number of years and fraction of a year of credited service

multiplied by 1.5% of the portion of final average compensation

over $114,000.00. A member who retires as provided in this section

after July 1, 2010 and before October 1, 2010 shall receive a

retirement allowance equal to the member's number of years and

fraction of a year of credited service multiplied by 1.6% of the

member's final average compensation calculated on a final average

compensation of $114,000.00 or less. For members whose final

average compensation is greater than $114,000.00, the retirement

allowance shall be calculated so that the member receives a portion

of his or her retirement allowance equal to the member's number of

years and fraction of a year of credited service multiplied by 1.6%

of his or her final average compensation up to a final average

compensation of $114,000.00 and the remaining portion of the

retirement allowance shall be calculated as equal to the member's

number of years and fraction of a year of credited service

multiplied by 1.5% of the portion of final average compensation

over $114,000.00. The retirement allowance received under this

section is not subject to reduction under section 84(2).

(3) The superintendent for a reporting unit or the chief

administrator for a reporting unit that does not have a

superintendent may request that the effective date of retirement

under subsection (1) of a member employed by that reporting unit be

extended to a date not later than July 1, 2011. To make a request

under this subsection, the superintendent or chief administrator

shall submit a written request and the written concurrence of the

member to the superintendent of public instruction on or before

June 1, 2010. Upon receipt of the written request and concurrence,

the superintendent of public instruction may extend the effective

date of retirement of a member otherwise eligible to retire under

subsection (1) to a date not later than July 1, 2011. The

superintendent of public instruction shall submit written

notification to the office of retirement services of all extensions

approved on or before June 15, 2010.

(4) For purposes of this section, "incentivized retirement

application period" means the period beginning on May 1, 2010 and

ending on May 31, 2010.

(5) Any additional costs to the retirement system as a result

of the retirement allowance calculations under this section shall

be amortized over a 5-year period.

Sec. 91. (1) Except as otherwise provided in this section, the

retirement system shall pay the entire monthly premium or

membership or subscription fee for hospital, medical-surgical, and

sick care benefits for the benefit of a retirant or retirement

allowance beneficiary who elects coverage in the plan authorized by

the retirement board and the department. Except as otherwise

provided in subsection (8), this subsection does not apply to a

retirant who first becomes a member after June 30, 2008.

(2) The retirement system may pay up to the maximum of the

amount payable under subsection (1) toward the monthly premium for

hospital, medical-surgical, and sick care benefits for the benefit

of a retirant or retirement allowance beneficiary enrolled in a

group health insurance or prepaid service plan not authorized by

the retirement board and the department, if enrolled before June 1,

1975, for whom the retirement system on July 18, 1983 was making a

payment towards his or her monthly premium.

(3) A retirant or retirement allowance beneficiary receiving

hospital, medical-surgical, and sick care benefits coverage under

subsection (1) or (2), until eligible for medicare, shall have an

amount equal to the cost chargeable to a medicare recipient for

part B of medicare deducted from his or her retirement allowance.

(4) The retirement system shall pay 90% of the monthly premium

or membership or subscription fee for dental, vision, and hearing

benefits for the benefit of a retirant or retirement allowance

beneficiary who elects coverage in the plan authorized by the

retirement board and the department. Payments shall begin under

this subsection upon approval by the retirement board and the

department of plan coverage and a plan provider. Except as

otherwise provided in subsection (8), this subsection does not

apply to a retirant who first becomes a member after June 30, 2008.

(5) The retirement system shall pay up to 90% of the maximum

of the amount payable under subsection (1) toward the monthly

premium or membership or subscription fee for hospital, medical-

surgical, and sick care benefits coverage described in subsections

(1) and (2) for each health insurance dependent of a retirant

receiving benefits under subsection (1) or (2). Payment shall not

exceed 90% of the actual monthly premium or membership or

subscription fee. The retirement system shall pay 90% of the

monthly premium or membership or subscription fee for dental,

vision, and hearing benefits described in subsection (4) for the

benefit of each health insurance dependent of a retirant receiving

benefits under subsection (4). Payment for health benefits coverage

for a health insurance dependent of a retirant shall not be made

after the retirant's death, unless the retirant designated a

retirement allowance beneficiary as provided in section 85 and the

dependent was covered or eligible for coverage as a health

insurance dependent of the retirant on the retirant's date of

death. Payment for health benefits coverage shall not be made for a

health insurance dependent after the later of the retirant's death

or the retirement allowance beneficiary's death. Payment under this

subsection and subsection (6) began October 1, 1985 for health

insurance dependents who on July 10, 1985 were covered by the

hospital, medical-surgical, and sick care benefits plan authorized

by the retirement board and the department. Payment under this

subsection and subsection (6) for other health insurance dependents

shall not begin before January 1, 1986. Except as otherwise

provided in subsection (8), this subsection does not apply to a

retirant who first becomes a member after June 30, 2008.

(6) The payment described in subsection (5) shall also be made

for each health insurance dependent of a deceased member or

deceased duty disability retirant if a retirement allowance is

being paid to a retirement allowance beneficiary because of the

death of the member or duty disability retirant as provided in

section 43c(c), 89, or 90. Payment for health benefits coverage for

a health insurance dependent shall not be made after the retirement

allowance beneficiary's death.

(7) The payments provided by this section shall not be made on

behalf of a retiring section 82 deferred member or health insurance

dependent of a deferred member having less than 21 full years of

attained credited service or the retiring deferred member's

retirement allowance beneficiary, and shall not be made on behalf

of a retirement allowance beneficiary of a deferred member who dies

before retiring. The retirement system shall pay, on behalf of a

retiring section 82 deferred member or health insurance dependent

of a deferred member or a retirement allowance beneficiary of a

deceased deferred member, either of whose allowance is based upon

not less than 21 years of attained credited service, 10% of the

payments provided by this section, increased by 10% for each

attained full year of credited service beyond 21 years, not to

exceed 100%. This subsection applies to any member who first became

a member on or before June 30, 2008 and attains deferred status

under section 82 after October 31, 1980.

(8) For a member or deferred member who first becomes a member

after June 30, 2008, the retirement system shall pay up to 90% of

the monthly premium or membership or subscription fee for the

hospital, medical-surgical, and sick care benefits plan, the dental

plan, vision plan, and hearing plan, or any combination of the

plans for the benefit of the retirant and his or her retirement

allowance beneficiary and health insurance dependents, or for the

benefit of the deceased member's retirement allowance beneficiary

if the retirant or deceased member has 25 years or more of service

credit under this act, and the retirant, deceased retirant, or

deceased member was at least 60 years of age at the time of

application for benefits under this section. If the retirant or

deceased member is less than 60 years of age at the time of

application for benefits under this section, the retirement system

shall pay 90% of the monthly premium or membership or subscription

fee for the hospital, medical-surgical, and sick care benefits

plan, the dental plan, vision plan, and hearing plan, or any

combination of the plans for the benefit of the retirant and his or

her retirement allowance beneficiary and the retirant's health

insurance dependents, or for the benefit of the deceased member's

retirement allowance beneficiary if the retirant or deceased member

has 25 or more years of service credit granted under section 68. If

a retirant, deceased retirant, or deceased member described in this

subsection has 10 or more but less than 25 years of service credit

under this act and the retirant was at least 60 years of age at the

time of application for benefits under this section, the retirement

system shall pay a portion of the monthly premium or membership or

subscription fee for the plans or combination of plans equal to the

product of 3% and the retirant's, deceased retirant's, or deceased

member's years of service for the first 10 years and 4% for each

year after the first 10 years. This subsection does not apply to a

member who receives a disability retirement allowance under section

86 or 87 or to a deceased member's retirement allowance beneficiary

under section 90.

(9) The retirement system shall not pay the premiums or

membership or subscription fees under subsection (8) until the

retirant or retirement allowance beneficiary requests enrollment in

the plans or combination of plans in writing in the manner

prescribed by the retirement system. Not more than 1 year's service

credit shall be counted for purposes of subsection (8) and this

subsection in any school fiscal year.

(10) A member who retires under section 43b or 81 and who

elects to purchase service credit on or after July 1, 2008 is not

eligible for payments under this section for the hospital, medical-

surgical, and sick care benefits plan, the dental plan, vision

plan, or hearing plan, or any combination of the plans described in

this section until the first date that the member would have been

eligible to retire under section 43b or 81 if he or she had not

purchased the service credit and had accrued a sufficient amount of

service credit under section 68. A member who first becomes a

member on or after July 1, 2008 shall not be eligible for health

benefits under this subsection until at least the time of

application under subsection (8). The retirement system shall apply

a method that enables it to make the determination under this

subsection.

(11) Except for a member who retires under section 86 or 87 or

a member who meets the requirements under subsection (7) or (8),

the retirement system shall not pay the benefits provided in

subsection (1) or (4) unless the member was employed and has

received a minimum total of 1/2 of a year of service credit granted

pursuant to section 68 during the 2 school fiscal years immediately

preceding the member's retirement allowance effective date or the

member has received a minimum of 1/10 of a year of service credit

granted pursuant to section 68 during each of the 5 school fiscal

years immediately preceding the member's retirement allowance

effective date. This subsection does not apply to a member who is

unable to meet the service credit requirements of this subsection

because of 1 or more periods of unpaid leaves of absence as a

result of a mental or physical disability.

(12) Any retirant or retirement allowance beneficiary excluded

from payments under this section may participate in the hospital,

medical-surgical, and sick care benefits plan, the dental plan,

vision plan, or hearing plan, or any combination of the plans

described in this section in the manner prescribed by the

retirement system at his or her own cost.

(13) The hospital, medical-surgical, and sick care benefits

plan, dental plan, vision plan, and hearing plan that covers

retirants, retirement allowance beneficiaries, and health insurance

dependents pursuant to this section shall contain a coordination of

benefits provision that provides all of the following:

(a) If the person covered under the hospital, medical-

surgical, and sick care benefits plan is also eligible for medicare

or medicaid, or both, then the benefits under medicare or medicaid,

or both, shall be determined before the benefits of the hospital,

medical-surgical, and sick care benefits plan provided pursuant to

this section.

(b) If the person covered under any of the plans provided by

this section is also covered under another plan that contains a

coordination of benefits provision, the benefits shall be

coordinated as provided by the coordination of benefits act, 1984

PA 64, MCL 550.251 to 550.255.

this section is also covered under another plan that does not

contain a coordination of benefits provision, the benefits under

the other plan shall be determined before the benefits of the plan

provided pursuant to this section.

(14) Beginning January 1, 2009, upon the death of the

retirant, a retirement allowance beneficiary who became a

retirement allowance beneficiary under section 85(8) or (9) is not

a health insurance dependent and is not entitled to health benefits

under this section except as provided in this subsection. Beginning

January 1, 2009, a surviving spouse selected as a retirement

allowance beneficiary under section 85(8) or (9) may elect the

insurance coverages provided in this section provided that payment

for the elected coverages is the responsibility of the surviving

spouse and is paid in a manner prescribed by the retirement system.

(15) For purposes of this section:

(a) "Health insurance dependent" means any of the following:

(i) Except as provided in subsection (14), the spouse of the

retirant or the surviving spouse to whom the retirant or deceased

member was married at the time of the retirant's or deceased

member's death.

(ii) An unmarried child, by birth or adoption, of the retirant

or deceased member, until December 31 of the calendar year in which

the child becomes 19 years of age.

(iii) An unmarried child, by birth or adoption, of the retirant

or deceased member, until December 31 of the calendar year in which

the child becomes 25 years of age, who is enrolled as a full-time

student, and who is or was at the time of the retirant's or

deceased member's death a dependent of the retirant or deceased

member as defined in section 152 of the internal revenue code.

(iv) An unmarried child, by birth or adoption, of the retirant

or deceased member who is incapable of self-sustaining employment

because of mental or physical disability, and who is or was at the

time of the retirant's or deceased member's death a dependent of

the retirant or deceased member as defined in section 152 of the

internal revenue code.

(v) The parents of the retirant or deceased member, or the

parents of his or her spouse, who are residing in the household of

the retirant or retirement allowance beneficiary.

(vi) An unmarried child who is not the child by birth or

adoption of the retirant or deceased member but who otherwise

qualifies to be a health insurance dependent under subparagraph

(ii), (iii), or (iv), if the retirant or deceased member is the legal

guardian of the unmarried child.

(b) "Medicaid" means benefits under the federal medicaid

program established under title XIX of the social security act, 42

USC 1396 to 1396v.

program established under title XVIII of the social security act,

42 USC 1395 to 1395hhh.

Sec. 92a. (1) There is appropriated for the fiscal year ending

September 30, 2010, $4,500,000.00 to the office of retirement

services in the department of technology, management, and budget

for administration of the changes under the amendatory act that

added this section.

(2) The appropriation authorized in subsection (1) is a work

project appropriation and any unencumbered or unallotted funds are

carried forward into the following fiscal year. The following is in

compliance with section 451a(1) of the management and budget act,

1984 PA 431, MCL 18.1451a:

(a) The purpose of the project is to administer changes under

the amendatory act that added this section.

(b) The work project will be accomplished through a plan

utilizing interagency agreements, employees, and contracts.

$4,500,000.00.

(d) The estimated completion date for the work project is

September 30, 2011.

Enacting section 1. If any section or part of a section of

this act is for any reason held to be invalid or unconstitutional,