HOUSE BILL NO. 5986

A bill to amend 1943 PA 240, entitled

"State employees' retirement act,"

by amending section 31 (MCL 38.31), as amended by 2002 PA 99.

the people of the state of michigan enact:

Sec. 31. (1) Except as otherwise provided in subsection (6), before the effective date of retirement, but not after the effective date of retirement, a member or deferred member who is eligible for retirement, as provided in this act, shall elect to receive his or her benefit in a retirement allowance payable throughout life, which shall be called a regular retirement allowance, or to receive the actuarial equivalent at that time of his or her the member's or deferred member's regular retirement allowance in a reduced retirement allowance payable throughout the lives of the retirant and a retirement allowance beneficiary, pursuant to under 1 of the following payment options:

(a) Option A. Upon On the retirant's death, his or her the retirant's reduced retirement allowance shall will be continued throughout the life of and paid to the retirement allowance beneficiary whom the member nominated by written designation executed and filed with the retirement board before the effective date of his or her the member's retirement.

(b) Option B. Upon On the retirant's death, 1/2 of his or her the retirant's reduced retirement allowance shall will be continued throughout the life of and paid to the retirement allowance beneficiary whom the member nominated by written designation executed and filed with the retirement board before the effective date of his or her the member's retirement.

(c) Option C. On and after January 1, 2000, upon After December 31, 1999, on the retirant's death, 3/4 of his or her the retirant's reduced retirement allowance shall will be continued throughout the life of and paid to the retirement allowance beneficiary whom the member nominated by written designation executed and filed with the retirement board before the effective date of his or her the member's retirement.

(d) Option D. If a retirement allowance beneficiary designated under subdivisions (a) to (c) is a beneficiary of a trust established under 42 USC 1396p(d)(4)(A) or (C), the retirement allowance payable to the retirement allowance beneficiary may be paid by the retirement system to the trust on written direction to the retirement system by the retirant or, after the retirant is deceased, by the retirement allowance beneficiary or by the retirant's legal representative if the retirement allowance beneficiary is a minor or is incapacitated.

(2) Except as otherwise provided in subsections (3) and (8), the election of a payment option under subsection (1) shall must not be changed on or after the effective date of the retirement allowance. A retirement allowance beneficiary designated under this section shall must not be changed on or after the effective date of the retirement allowance, and shall must be either a spouse, brother, sister, parent, child, including an adopted child, or grandchild of the person individual making the designation or a trust described in subsection (1)(d). Payment to a retirement allowance beneficiary shall must begin on the first day of the month following the death of the retirant or member.

(3) If the retirement allowance beneficiary named under a payment option under subsection (1) predeceases the retirant, the retirant's benefit shall must revert to the regular retirement allowance, effective with the first day of the month following after the retirement allowance beneficiary's death. For This subsection applies to a retirant whose effective date of retirement was on or before June 28, 29, 1976, this subsection shall apply, but the regular retirement allowance is not payable for any month beginning before the later of the retirement allowance beneficiary's death or January 1, 1986. A retirant who on January 1, 1986 is receiving a reduced retirement allowance because the retirant designated a retirement allowance beneficiary and the retirement allowance beneficiary predeceased the retirant is eligible to receive the regular retirement allowance beginning January 1, 1986, but the regular retirement allowance is not payable for any month beginning before January 1, 1986.

(4) A member who continues in the employ of to be employed by this state on and after the date he or she the member acquires 10 years of service credit or becomes eligible for deferred retirement as provided by section 20(4) or (5), whichever occurs first, may by written declaration executed and filed with the retirement board elect option A, provided for in subsection (1)(a), and nominate a retirement allowance beneficiary in the same manner as if the member were then retiring from service, notwithstanding that the member may not have attained 60 years of age. If the beneficiary's death or divorce from the member occurs before the effective date of the member's retirement, the member's election of option A and nomination of retirement allowance beneficiary shall be is automatically revoked and the member may again elect option A and nominate a retirement allowance beneficiary at any time before the effective date of retirement. If a member who has made an election and nominated a retirement allowance beneficiary as provided in this subsection dies before the effective date of his or her the member's retirement, then the retirement allowance beneficiary shall must immediately receive the retirement allowance that he or she the retirement allowance beneficiary would have been entitled to receive under option A if the member had been regularly retired on the date of the member's death. Except as otherwise provided by subsection (5), if a member who has made an election under this subsection subsequently retires under this act, his or her the member's election of option A shall take takes effect at the time of retirement. Subject to the requirements of subsection (5), the member, before the effective date of retirement, but not after the effective date of retirement, may revoke his or her the member's previous election of option A and elect to receive his or her the member's retirement allowance as a regular retirement allowance or under option B or C as provided for in subsection (1). A retirement allowance shall must not be paid under this subsection on account because of the death of a member if any benefits are paid under section 27 on account because of his or her the member's death. If a deferred member who has an option A election in effect dies before the effective date of his or her the deferred member's retirement, the retirement allowance payable under option A shall must be paid to the retirement allowance beneficiary at the time the deceased deferred member otherwise would have been eligible to begin receiving benefits.

(5) If a member, deferred member, retiring member, or retiring deferred member is married at the effective date of the retirement allowance, an election under this section, other than an election of a payment option under subsection (1) naming the spouse as retirement allowance beneficiary, shall is not be effective unless the election is signed by the spouse. However, this requirement may be waived by the retirement board if the signature of a spouse cannot be obtained because of extenuating circumstances. As used in this subsection, "spouse" means the person individual to whom the member, deferred member, retiring member, or retiring deferred member is married at the effective date of the retirement allowance.

(6) Until July 1, 1991, upon on request in a form as determined by the retirement board, a nonduty disability retirant who retired under section 24 may change his or her the nonduty disability retirant's election to receive a disability retirement allowance computed as a regular retirement allowance and elect to receive the actuarial equivalent at the time of the election pursuant to under this subsection of his or her the nonduty disability retirant's disability retirement allowance in a reduced retirement allowance payable to the retirant and the retirant's spouse pursuant to under the provisions of a payment option as provided in subsection (1), if the disability retirement allowance effective date was before November 12, 1985 and the retirant had 25 or more years of credited service on the disability retirement allowance effective date. The nonduty disability retirant shall must begin to receive the reduced retirement allowance under this subsection effective the first day of the month following after the month in which the retirant makes the election pursuant to under this subsection. As used in this subsection, "spouse" means the person individual to whom the nonduty disability retirant was married on the effective date of his or her the nonduty disability retirant's disability retirement allowance and on the date the retirant makes the election pursuant to under this subsection.

(7) If a member who continues in the employ of to be employed by this state on and after the date he or she the member acquires 10 years of service credit, or on and after the date he or she the member becomes eligible for deferred retirement as provided by section 20(4) or (5), whichever occurs first, and who does not have an election of option A in force as provided in subsection (4), dies before the effective date of retirement and leaves a surviving spouse, the spouse shall must receive a retirement allowance computed in the same manner as if the member had retired effective the day before the date of his or her the member's death, elected option A, and nominated the spouse as retirement allowance beneficiary. When the retirement allowance beneficiary dies, his or her the retirement allowance beneficiary's retirement allowance shall must terminate. If the aggregate amount of retirement allowance payments received by the beneficiary is less than the accumulated contributions credited to the member's account in the employees' savings fund at the time of the member's death, the difference between the accumulated contributions and the aggregate amount of retirement allowance payments received by the beneficiary shall must be transferred from the employer's accumulation fund or pension reserve fund to the employees' savings fund and paid pursuant to under section 29. A retirement allowance shall must not be paid under this subsection on account because of the death of a member if benefits are paid under section 27 on account because of his or her the member's death. If the other requirements of this subsection are met but a surviving spouse does not exist, each of the deceased member's surviving children less than 18 years of age shall must receive an allowance of an equal share of the retirement allowance that would have been paid to the spouse if living at the time of the deceased member's death. Payments under this subsection shall must cease upon on the surviving child's marriage, adoption, or becoming 18 years of age, which whichever occurs first.

(8) If a retirant receiving a reduced retirement allowance under a payment option under subsection (1) is divorced from the spouse who had been designated as the retirant's retirement allowance beneficiary under the payment option, the retirement system shall consider the election of the payment option shall be considered void by the retirement system if the judgment of divorce or award or order of the court, or an amended judgment of divorce or award or order of the court, described in the public employee retirement benefit protection act, 2002 PA 100, MCL 38.1681 to 38.1689, and dated after June 27, 1991 provides that the election of the payment option under subsection (1) is to be considered void by the retirement system and the retirant provides a certified copy of the judgment of divorce or award or order of the court, or an amended judgment of divorce or award or order of the court, to the retirement system. If the retirement system considers the election of a payment option under subsection (1) is considered void by the retirement system under this subsection, the retirant's retirement allowance shall must revert to a regular retirement allowance, including postretirement adjustments, if any, subject to an award or order of the court as described in the public employee retirement benefit protection act, 2002 PA 100, MCL 38.1681 to 38.1689. The retirement allowance shall must revert to a regular retirement allowance under this subsection effective the first of the month after the date the retirement system receives a certified copy of the judgment of divorce or award or order of the court. This subsection does not supersede a judgment of divorce or award or order of the court in effect on June 27, 1991. This subsection does not require the retirement system to distribute or pay retirement assets on behalf of a retirant in an amount that exceeds the actuarially determined amount that would otherwise become payable if a judgment of divorce had not been rendered.

(9) As used in this section, "regular retirement allowance" means a retirement allowance payable for life.