Bill Text: MI HB6131 | 2009-2010 | 95th Legislature | Introduced
Bill Title: Retirement; public school employees; defined contribution plan for public school employees hired after June 1, 2010; provide for. Amends secs. 4, 8, 25, 26 & 34 of 1980 PA 300 (MCL 38.1304 et seq.) & adds secs. 41b, 109, 110, 111 & 112 & art. 7.
Spectrum: Partisan Bill (Republican 9-0)
Status: (Introduced - Dead) 2010-05-06 - Printed Bill Filed 05/06/2010 [HB6131 Detail]
Download: Michigan-2009-HB6131-Introduced.html
HOUSE BILL No. 6131
May 5, 2010, Introduced by Reps. Rick Jones, Agema, DeShazor, Moss, Knollenberg, Lund, Proos, Pavlov and Pearce and referred to the Committee on Education.
A bill to amend 1980 PA 300, entitled
"The public school employees retirement act of 1979,"
by amending sections 4, 8, 25, 26, and 34 (MCL 38.1304, 38.1308,
38.1325, 38.1326, and 38.1334), section 4 as amended by 2008 PA
354, sections 8, 25, and 26 as amended by 1997 PA 143, and section
34 as amended by 2002 PA 94, and by adding sections 41b, 109, 110,
111, and 112 and article 7.
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 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.
(c) An annuity plan described in section 403(a) of the
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.
(c) A distribution to the extent that the distribution is
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. 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) "Implementation date" means June 1, 2010.
(15) (14)
"Internal revenue code"
means the United States
internal revenue code of 1986.
(16) (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.
(17) (16)
"Member investment plan"
means the program of member
contributions described in section 43a.
(18) "Plan document" means the document that contains the
provisions and procedures of Tier 2 in conformity with this act and
the internal revenue code.
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.
(5) "Tier 1" means the retirement plan available to a member
under this act who was first employed by a reporting unit before
the implementation date and who does not elect to become a
qualified participant of Tier 2.
(6) "Tier 2" means the retirement plan or plans established
pursuant to the plan documents that are available to qualified
participants under sections 109 to 112 and article 7.
(7) (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. 25. (1) The board shall have only the rights, authority,
and discretion in the proper discharge of its duties provided in
this act and former 1945 PA 136.
(2)
The Except as otherwise
provided in this section, the
retirement board may promulgate rules pursuant to the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328, for the implementation and administration of this act. The
retirement board shall not promulgate rules for the establishment,
implementation, administration, operation, investment, or
distribution of a Tier 2 retirement plan.
Sec. 26. (1) This section does not apply to Tier 2.
(2) (1) The state treasurer shall be treasurer
of the
retirement system and shall have investment authority, including
the custodianship of the funds of the retirement system, and shall
have fiduciary responsibility with regard to the investment of
funds of the retirement system.
(3) (2)
The state treasurer shall deposit the funds of the
retirement system in the same manner and subject to the law
governing the deposit of state funds by the treasurer. Income
earned by the retirement system's funds shall be credited to the
respective reserves under this act that earned the income.
Sec. 34. (1) The reserve for health benefits is the account to
which payments of reporting units, subscriber copayments, and
payments by the retirement system under section 136 for health
benefits
are credited. Benefits payable pursuant to section 91
sections 91 and 136 shall be paid from the reserve for health
benefits. The assets and any earnings on the assets contained in
the reserve for health benefits and the health advance funding
subaccount are not to be treated as pension assets for any purpose.
(2) The health advance funding subaccount is the account to
which amounts transferred pursuant to section 41 are credited.
Except as otherwise provided in this section, any amounts received
in the health advance funding subaccount and accumulated earnings
on those amounts shall not be expended until the actuarial accrued
liability for health benefits under section 91 is at least 100%
funded. The department may expend funds or transfer funds to
another account to expend for health benefits under section 91 if
the actuarial accrued liability for health benefits under section
91 is at least 100% funded. For each fiscal year that begins after
the first 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, the amounts may be expended or
credited to fund health benefits provided under section 91 as
provided in section 41(2).
(3) Notwithstanding any other provision of this section, the
department may transfer amounts from the health advance funding
subaccount to the reserve for employer contributions established in
section 30 if the department does both of the following:
(a) At least 45 days before the intended transfer, submits a
request to the chairs of the senate and house appropriations
committees and, at least 15 days before the intended transfer,
obtains the approval of both the senate and house appropriations
committees.
(b) Ensures that the request submitted to the senate and house
appropriations committees contains an actuarial valuation prepared
pursuant to section 41 that 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 does not exceed the actuarial
present value of benefits.
Sec. 41b. For fiscal years that begin on or after the
effective date of the amendatory act that added this section, the
annual level percentage of payroll contribution rate as it applies
to the unfunded actuarial accrued liability determined under
section 41 shall be based on and applied to the combined payrolls
for members of Tier 1 and qualified participants of Tier 2.
Sec. 109. (1) An individual who was a deferred member or
former nonvested member on the day before the implementation date,
who is employed by a reporting unit on or after the implementation
date, and who by virtue of that employment would be eligible for
membership in Tier 1 may make an election as prescribed in section
110.
(2) An individual who is first employed and entered upon the
payroll of a reporting unit on or after the implementation date
shall become a qualified participant of Tier 2. The date of
membership in Tier 1 or participation in Tier 2 under this
subsection dates back to the date the individual was first employed
and entered upon the payroll of a reporting unit.
Sec. 110. (1) Except as otherwise provided in subsection (2),
the retirement system shall provide an opportunity for each member
who is a Tier 1 member on the day before the implementation date,
to elect in writing to terminate membership in Tier 1 and elect to
become a qualified participant in Tier 2. An election made by a
member under this subsection is irrevocable. The retirement system
shall accept written elections under this subsection from members
during the period beginning on April 30, 2010 and ending on July 3,
2010. A member 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 member of Tier 1. A member 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 1 effective 12 midnight on
May 31, 2010.
(b) Become a qualified participant in Tier 2 effective 12:01
a.m. on June 1, 2010.
(c) Except as otherwise provided in this subdivision, waive
all of his or her rights to a pension, an annuity, a retirement
allowance, or any other benefit under Tier 1 effective 12 midnight
on the day described in subdivision (a). This subdivision does not
affect a person's right to health benefits provided under this act
pursuant to section 136.
(2) This subsection applies to an individual who was a vested
member of Tier 1 on the day before the implementation date and who
terminates the employment upon which that membership is based on or
after the implementation date but on or before December 31, 2010.
Before the termination of his or her employment, an individual
described in this subsection may elect in writing to terminate
membership in Tier 1 and become a qualified participant in Tier 2.
An election made by a member under this subsection is irrevocable.
The retirement system shall accept written elections under this
subsection from a member during the period beginning on the
implementation date and ending on December 31, 2010. A member
described in this subsection who does not make a written election
or who does not file the election before the termination of his or
her employment continues to be a member or deferred member of Tier
1. A member who makes and files a written election under this
subsection to terminate membership in Tier 1 elects to do all of
the following:
(a) Cease to be a member of Tier 1 and become a qualified
participant in Tier 2 effective 12 midnight on the day immediately
preceding the date of the termination of employment.
(b) Become a former qualified participant in Tier 2 effective
12:01 a.m. on the day immediately following the date described in
subdivision (a).
(c) Except as otherwise provided in this subdivision, waive
all of his or her rights to a pension, an annuity, a retirement
allowance, an insurance benefit, or any other benefit under Tier 1
effective 12 midnight on the date described in subdivision (a).
This subdivision does not affect an individual's right to health
benefits provided under this act pursuant to section 136.
(3) If an individual who was a deferred member on the day
before the implementation date or an individual who was a former
nonvested member on the day before the implementation date is
employed by a reporting unit on or after the implementation date
and by virtue of that employment is again eligible for membership
in Tier 1, the individual shall elect in writing to remain a member
of Tier 1 or to terminate membership in Tier 1 and become a
qualified participant in Tier 2. An election made by a deferred
member or a former nonvested member under this subsection is
irrevocable. The retirement system shall accept written elections
under this subsection from a deferred member or a former nonvested
member during the period beginning on the date of the individual's
reemployment and ending upon the expiration of 60 days after the
date of that reemployment. A deferred member or former nonvested
member who makes and files a written election to remain a member of
Tier 1 retains all rights and is subject to all conditions as a
member of Tier 1 under this act. A deferred member or former
nonvested member 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 member of Tier 1. A deferred member or
former nonvested member who makes and files a written election to
terminate membership in Tier 1 elects to do all of the following:
(a) Cease to be a member of Tier 1 effective 12 midnight on
the last day of the payroll period that includes the date of the
election.
(b) Become a qualified participant in Tier 2 effective 12:01
a.m. on the first day of the payroll period immediately following
the date of the election.
(c) Except as otherwise provided in this subdivision, waive
all of his or her rights to a pension, an annuity, a retirement
allowance, an insurance benefit, or any other benefit under Tier 1
effective 12 midnight on the last day of the payroll period that
includes the date of the election. This subdivision does not affect
an individual's right to health benefits provided under this act
pursuant to section 136.
(4) After consultation with the retirement system's actuary
and the retirement board, the department shall determine the method
by which a member, deferred member, or former nonvested member
shall make a written election under this section. If the member,
deferred member, or former nonvested member 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.
(5) An election under this section is subject to the eligible
domestic relations order act, 1991 PA 46, MCL 38.1701 to 38.1711.
(6) If an individual who was a deferred member of the state
employees' retirement system on the day before the implementation
date is first employed and entered upon the payroll of a reporting
unit on or after the implementation date, the retirement system
shall provide an opportunity for that individual to elect in
writing to become a member of Tier 1 or to become a qualified
participant of Tier 2. The retirement system and the individual
shall follow the provisions and procedures provided in this section
and by the department as if the individual were a deferred member
of Tier 1 on the day before the implementation date.
(7) If the department 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.
Sec. 111. (1) For a member who elects to terminate membership
in Tier 1 under section 110(1), the retirement system shall direct
the state treasurer to transfer a lump sum amount from the
appropriate reserve created under article 2 to the qualified
participant's account in Tier 2 on or before June 1, 2010. The
retirement system shall calculate the amount to be transferred,
which shall be equal to the sum of the following:
(a) The member's accumulated contributions, if any, from the
reserve for employee contributions as of 12 midnight June 1, 2010.
(b) For a member who is a participant in the member investment
plan, the member's accumulated contributions, if any, from the
reserve for member investment plan as of 12 midnight June 1, 2010.
(c) For a member who is vested under section 81 as of 12
midnight June 1, 2010, the excess, if any, of the actuarial present
value of the member's accumulated benefit obligation, over the
amount specified in subdivisions (a) and (b), from the reserve for
employer contributions. Except as provided in subsection (7), for
the purposes of this subsection, the present value of the member's
accumulated benefit obligation is based upon the member's actual
credited service and actual final average compensation as of 12
midnight June 1, 2010. The actuarial present value shall be
computed as of 12 midnight June 1, 2010 and shall be based on the
following:
(i) Eight percent effective annual interest, compounded
annually.
(ii) A 50% male and 50% female gender neutral blend of the
mortality tables used to project retirant longevity in the most
recent actuarial valuation report.
(iii) A benefit commencement age, based upon the member's
estimated credited service as of 12 midnight June 1, 2010. The
benefit commencement age shall be the younger of the following, but
shall not be younger than the member's age as of 12 midnight June
1, 2010:
(A) Age 60.
(B) Age 55, if the member's estimated credited service equals
or exceeds 30 years.
(C) The age of the member if the member's credited service
equals or exceeds 30 years and the member contributes to the member
investment plan.
(D) Interest on any amounts determined in subdivisions (a),
(b), and (c) from June 2, 2010 to the date of the transfer, based
upon 8% annual interest, compounded annually.
(2) For a member who elects to terminate membership in Tier 1
under section 110(2), the retirement system shall direct the state
treasurer to transfer a lump sum amount from the appropriate
reserve created under article 2 to the former qualified
participant's account in Tier 2 on or before the expiration of 60
days after the date of the individual's termination of employment.
The retirement system shall calculate the amount to be transferred,
which shall be equal to the sum of the following:
(a) The member's accumulated contributions, if any, from the
reserve for employee contributions as of 12 midnight on the day
immediately preceding the date of the termination of employment.
(b) For a member who is a participant in the member investment
plan, the member's accumulated contributions, if any, from the
reserve for member investment plan as of 12 midnight on the day
immediately preceding the date of the termination of employment.
(c) The excess of any actuarial present value of the member's
accumulated benefit obligation, over the amount specified in
subdivisions (a) and (b), from the reserve for employer
contributions. Except as provided in subsection (7), for the
purposes of this subsection, the present value of the member's
accumulated benefit obligation is based upon the member's actual
credited service and actual final average compensation as of 12
midnight on the day immediately preceding the date of the
termination of employment. The actuarial present value shall be
computed as of 12 midnight on that date and shall be based on the
following:
(i) Eight percent effective annual interest, compounded
annually.
(ii) A 50% male and 50% female gender neutral blend of the
mortality tables used to project retirant longevity in the most
recent annual actuarial valuation report.
(iii) A benefit commencement age, based upon the member's
estimated credited service as of 12 midnight on the day immediately
preceding the date of the termination of employment. The benefit
commencement age shall be the younger of the following, but shall
not be younger than the member's age as of 12 midnight on the day
immediately preceding the date of the termination of employment:
(A) Age 60.
(B) Age 55, if the member's estimated credited service equals
or exceeds 30 years.
(C) The age of the member if the member's credited service
equals or exceeds 30 years and the member is a participant of the
member investment plan.
(D) Interest on any amounts determined in subdivisions (a),
(b), and (c) from the day immediately following the date described
in subdivision (a) to the date of the transfer, based upon 8%
effective annual interest, compounded annually.
(3) For a deferred member who elects to terminate membership
in Tier 1 under section 110(3), the retirement system shall direct
the state treasurer to transfer a lump sum amount from the
appropriate reserve created under article 2 to the qualified
participant's account in Tier 2 on or before the expiration of 60
days after the date of the individual's election to terminate
membership. The retirement system shall calculate the amount to be
transferred, which shall be equal to the sum of the following:
(a) The deferred member's accumulated contributions, if any,
from the reserve for employee contributions as of 12 midnight on
the last day of the payroll period that includes the date of the
election.
(b) For a deferred member who is a participant in the member
investment plan, the deferred member's accumulated contributions,
if any, from the reserve for member investment plan as of 12
midnight on the last day of the payroll period that includes the
date of the election.
(c) The excess, if any, of the actuarial present value of the
deferred member's accumulated benefit obligation, over the amount
specified in subdivisions (a) and (b), from the reserve for
employer contributions. Except as provided in subsection (5), for
the purposes of this subsection, the present value of the deferred
member's accumulated benefit obligation is based upon the deferred
member's actual credited service and actual final average
compensation as of 12 midnight on the last day of the payroll
period that includes the date of the election. The actuarial
present value shall be computed as of 12 midnight on that date and
shall be based on the following:
(i) Eight percent effective annual interest, compounded
annually.
(ii) A 50% male and 50% female gender neutral blend of the
mortality tables used to project retirant longevity in the most
recent annual actuarial valuation report.
(iii) A benefit commencement age, based upon the member's
estimated credited service as of 12 midnight on the last day of the
payroll period that includes the date of the election. The benefit
commencement age shall be the younger of the following, but shall
not be younger than the member's age as of 12 midnight on the last
day of the payroll period that includes the date of the election:
(A) Age 60.
(B) Age 55, if the deferred member's estimated credited
service equals or exceeds 30 years.
(C) The age of the deferred member if the deferred member's
credited service equals or exceeds 30 years and the deferred member
is a participant of the member investment plan.
(D) Interest on any amounts determined in subdivisions (a),
(b), and (c) from the first day of the payroll period immediately
following the date of the election to the date of the transfer,
based upon 8% effective annual interest, compounded annually.
(4) For the purposes of subsections (1) to (3) and subsection
(6), the calculation of actual present value of the member's or
deferred member's accumulated benefit obligation shall be based
upon methods adopted by the department and the retirement system's
actuary in consultation with the retirement board. Actual final
average compensation shall be determined as provided in sections 3a
and 4(11) as of 12 midnight on the date the member or deferred
member ceases to be a member of Tier 1 under section 110.
(5) For a former nonvested member who elects to terminate
membership in Tier 1 under section 110(3) and who has accumulated
contributions standing to his or her credit in the reserve for
employee contributions or the reserve for member investment plan,
the retirement system shall direct the state treasurer to transfer
a lump sum amount from the appropriate reserve created under
article 2 to the qualified participant's account in Tier 2 on or
before the expiration of 60 days after the date of the individual's
election to terminate membership. The retirement system shall
calculate the amount to be transferred, which shall be equal to the
sum of the following:
(a) The former nonvested member's accumulated contributions,
if any, from the reserve for employee contributions as of 12
midnight on the last day of the payroll period that includes the
date of the election.
(b) For a former nonvested member who is a participant in the
member investment plan, the former nonvested member's accumulated
contributions, if any, from the reserve for member investment plan
as of 12 midnight on the last day of the payroll period that
includes the date of the election.
(c) Interest on any amounts determined in subdivisions (a) and
(b) from the first day of the payroll period immediately following
the date of the election to the date of the transfer, based upon 8%
effective annual interest, compounded annually.
(6) For each member who elects to terminate membership in Tier
1 under section 110, the retirement system shall do all of the
following:
(a) Direct the state treasurer to transfer from the reserve
for employer contributions to the qualified participant's account
in Tier 2 the excess of any recomputed amount over the previously
transferred amount together with interest from 12 midnight May 31,
2010 to the date of the transfer under this subsection, based upon
8% effective annual interest, compounded annually.
(b) Direct the state treasurer to transfer from the qualified
participant's account in Tier 2 to the reserve for employer
contributions the excess of any previously transferred amount over
the recomputed amount, together with interest, from the date of the
transfer made under subsection (1), based upon 8% effective annual
interest, compounded annually.
(7) If the department 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.
Sec. 112. After consulting the retirement system's actuary,
the department shall calculate for each fiscal year any cost
savings that have accrued as a result of the implementation of the
amendatory act that added this section over the costs that would
have been incurred had the amendatory act that added this section
not been implemented.
ARTICLE 7
Sec. 121. For the purposes of this article, the words and
phrases defined in sections 122 to 124 have the meanings ascribed
to them in those sections.
Sec. 122. (1) "Accumulated balance" means the total balance in
a qualified participant's, former qualified participant's, or
refund beneficiary's individual account in Tier 2.
(2) "Compensation" means the remuneration paid a qualified
participant on account of the qualified participant's services
equal to the sum of the following:
(a) A participant's W-2 earnings for services performed for
the employer.
(b) Any amount contributed or deferred at the election of the
participant which is excluded from gross income under section 125,
132(f)(4), 401(k), 403(b), or 457 of the internal revenue code, 26
USC 125, 132, 401, 403, and 457.
(3) "Department" means the department of management and
budget.
(4) "Director" means the director of the department of
management and budget or his or her designee.
Sec. 123. (1) "Employer" means a reporting unit.
(2) "Former qualified participant" means an individual who was
a qualified participant and who terminates the employment upon
which his or her participation is based for any reason.
(3) "Health benefit dependent" means an individual who would
have been eligible for health insurance coverage as a health
insurance dependent under section 91(15)(a) if the former qualified
participant had become a retirant of Tier 1.
Sec. 124. (1) "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 a reporting unit on or after the implementation date.
(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 110.
(2) "Refund beneficiary" means an individual nominated by a
qualified participant or a former qualified participant under
section 134 to receive a distribution of the participant's
accumulated balance in the manner prescribed in section 135.
(3) "State treasurer" means the treasurer of this state.
Sec. 124a. (1) The department shall designate 3 or more Tier 2
contracts or account plans provided by at least 3 different
entities, to be offered to participants in the Tier 2 plan. No Tier
2 plan option shall be designated under this section unless the
entity provides all of the following requirements:
(a) It is authorized to conduct business in this state with
regard to any annuity contracts or certificates to be offered under
the plan.
(b) It provides a defined contribution pension plan and
associated plan services to public sector employees in at least 10
other states.
(c) It provides a Tier 2 option that is an annuity contract or
custodial account that is not required to be held by a separate
plan trustee.
(2) In designating Tier 2 plans under this section, the
department shall consider all of the following:
(a) The experience of the entity in providing the plan in
other states.
(b) The potential effectiveness of the plan in the
recruitment and retention of academic or administrative employees.
(c) The nature and extent of the rights and benefits to be
provided under the plan.
(d) The relationship between the rights and benefits under the
plan and the amount of the contributions made under that plan.
(e) The suitability of the rights and benefits under the plan
to the needs and interests of academic or administrative employees.
(f) The capability of the entity offering the plan to provide
the rights and benefits under the plan, and to monitor compliance
under the contract or account with applicable federal tax
requirements incorporated into the contract or account.
(g) Any other supplemental matters it considers relevant.
(3) The department shall consult with the state treasurer in
determining appropriate investment vehicles offered within the
designated Tier 2 option plans. The department in consultation with
the state treasurer shall periodically review each Tier 2 plan
designated under this section and the entity offering the plan to
ensure that the requirements and purposes of this article are being
met. If the department finds that the entity offering a Tier 2 plan
is not in compliance with any requirement of this section or the
plan is not satisfactorily meeting the purposes of this article, it
may rescind its designation of the plan.
(4) The department shall determine the provisions and
procedures of Tier 2 in conformity with this article and the
requirements of the internal revenue code.
(5) The director shall use a competitive bidding process to
select any managerial, professional, or administrative services for
the proper administration and investment of assets of Tier 2. The
competitive bidding process shall include a requirement that any
service provider selected under this subsection will be required to
pay for the cost of any notification of members entitled to make an
election under section 110.
Sec. 126. (1) A qualified participant, former qualified
participant, health benefit dependent, or refund beneficiary may
request a hearing on a claim involving his or her rights under Tier
2. Upon written request, the department shall provide for a hearing
that shall be conducted pursuant to chapter 4 of the administrative
procedures act of 1969, 1969 PA 306, MCL 24.271 to 24.287. An
individual may be represented by counsel or other authorized agent
at a hearing conducted under this section.
(2) Chapters 2, 3, and 5 of the administrative procedures act
of 1969, 1969 PA 306, MCL 24.224 to 24.264 and 24.291 to 24.292, do
not apply to the establishment, implementation, administration,
operation, investment, or distribution of Tier 2.
Sec. 127. Each qualified participant, former qualified
participant, and refund beneficiary shall direct the investment of
the individual's accumulated employer and employee contributions
and earnings to 1 or more investment choices within available
categories of investment provided by the state treasurer. The
limitations on the percentage of total assets for investments
provided in the public employee retirement system investment act,
1965 PA 314, MCL 38.1132 to 38.1140m, do not apply to Tier 2.
Sec. 128. The administrative expenses of Tier 2 shall be paid
by the qualified participants, former qualified participants, and
refund beneficiaries who have not closed their accounts in a manner
determined by the department.
Sec. 129. A qualified participant shall not participate in any
other public sector retirement benefits plan for simultaneous
service rendered to the same public sector employer. Except as
otherwise provided in this act or by the department, this section
does not prohibit a qualified participant from participating in a
retirement plan established by a public sector employer under the
internal revenue code. For the purposes of this section, public
sector employer includes, but is not limited to, a reporting unit.
Sec. 130. (1) The department shall promptly credit the Tier 2
account of a qualified participant or former qualified participant
who makes an election under section 110 to terminate membership in
Tier 1 with any amount transferred from Tier 1 pursuant to section
111.
(2) Not later than 30 days after receipt of a recomputed
amount, the department shall charge the participant's Tier 2
account for any amount of excess transfers and transfer that amount
to the appropriate reserve in Tier 1. The director may determine
which investment choice or choices within a participant's Tier 2
account will be used for this purpose.
Sec. 131. (1) This section is subject to the vesting
requirements of section 132.
(2) A qualified participant's employer shall contribute to the
qualified participant's Tier 2 account an amount equal to 4% of the
qualified participant's compensation.
(3) A qualified participant may periodically elect to
contribute up to 3% of his or her compensation to his or her Tier 2
account. The qualified participant's employer shall make an
additional contribution to the qualified participant's Tier 2
account in an amount equal to the contribution made by the
qualified participant under this subsection.
(4) A qualified participant may make contributions in addition
to contributions made under subsection (3) to his or her Tier 2
account as permitted by the department and the internal revenue
code. The qualified participant's employer shall not match
contributions made by the qualified participant under this
subsection.
Sec. 132. (1) A qualified participant is immediately 100%
vested in his or her contributions made to Tier 2. A qualified
participant shall vest in the employer contributions made on his or
her behalf to Tier 2 according to the following schedule:
(a) Upon completion of 2 years of service, 50%.
(b) Upon completion of 3 years of service, 75%.
(c) Upon completion of 4 years of service, 100%.
(2) A qualified participant is vested in the health insurance
coverage provided in section 136 if the qualified participant meets
1 of the following requirements:
(a) The qualified participant has completed 10 years of
service as a qualified participant and was not a member, deferred
member, or former nonvested member of Tier 1.
(b) The qualified participant was a member, deferred member,
or former nonvested member of Tier 1 who made an election to
participate in Tier 2 pursuant to section 110, and who has met the
service requirements he or she would have been required to meet in
order to vest in health benefits under section 91.
Sec. 133. A qualified participant who was a member, deferred
member, or former nonvested member of Tier 1 who makes an election
to participate in Tier 2 pursuant to section 110, shall be credited
with the years of service accrued under Tier 1 on the effective
date of participation in Tier 2 for the purpose of meeting the
vesting requirements for benefits under section 132.
Sec. 134. A qualified participant or former qualified
participant may nominate 1 or more individuals as a refund
beneficiary by filing written notice of nomination with the
department. If the qualified participant or former qualified
participant is married at the time of the nomination and the
participant's spouse is not the refund beneficiary for 100% of the
account, the nomination is not effective unless the nomination is
signed by the participant's spouse. However, the department may
waive this requirement if the spouse's signature cannot be obtained
because of extenuating circumstances.
Sec. 135. (1) A qualified participant is eligible to receive
distribution of his or her accumulated balance in Tier 2 upon
becoming a former qualified participant.
(2) Upon the death of a qualified participant or former
qualified participant, the accumulated balance of that deceased
participant is considered to belong to the refund beneficiary, if
any, of that deceased participant. If a valid nomination of refund
beneficiary is not on file with the department, the department, in
a lump sum distribution, shall distribute the accumulated balance
to the legal representative, if any, of the deceased participant
or, if there is no legal representative, to the deceased
participant's estate.
(3) A former qualified participant or refund beneficiary may
elect 1 or a combination of several of the following methods of
distribution of the accumulated balance:
(a) A lump sum distribution to the recipient.
(b) A lump sum direct rollover to another qualified plan, to
the extent allowed by federal law.
(c) Periodic distributions, as authorized by the department.
(d) No current distribution, in which case the accumulated
balance shall remain in Tier 2 until the former qualified
participant or refund beneficiary elects a method or methods of
distribution under subdivisions (a) to (c), to the extent allowed
by federal law.
Sec. 135a. (1) A qualified participant whom the retirement
board finds to have become totally and permanently disabled from
any gainful employment by reason of personal injury or mental or
physical illness while serving as an employee of that reporting
unit shall be granted a supplemental benefit equivalent to the
amount provided for in section 84 as if the former qualified
participant had retired under section 87, which supplemental
benefit shall be offset by the value of the distribution of his or
her accumulated balance upon becoming a former qualified
participant pursuant to section 135.
(2) If a qualified participant dies as a result of injury or
illness arising out of and in the course of the qualified
participant's reporting unit service for which worker's disability
compensation is paid, or a duty disability retirant who is in
receipt of weekly worker's disability compensation on account of
the retirant's reporting unit service dies from the same causes for
which the former qualified participant retired within 36 months
after the former qualified participant's retirement, and in either
case the death or the illness or injury resulting in death is found
by the retirement board to have resulted, without the qualified
participant's or former qualified participant's willful negligence,
from the performance of the qualified participant's or former
qualified participant's reporting unit service, a supplemental
benefit shall be granted equivalent to the amount provided for in
section 84 had the former qualified participant been considered
retired under section 90, which supplemental benefit shall be
offset by the value of the distribution of his or her accumulated
balance upon becoming a former qualified participant pursuant to
section 135.
(3) A qualified participant who has at least 10 years of
credited service whom the retirement board finds to have become
totally and permanently disabled for purposes of employment by his
or her reporting unit by reason of personal injury or mental or
physical illness before termination of reporting unit service and
employment shall be granted a supplemental benefit equivalent to
the amount provided for in section 84 as if the former qualified
participant had retired under section 86, which supplemental
benefit shall be offset by the value of the distribution of his or
her accumulated balance upon becoming a former qualified
participant pursuant to section 135.
(4) If a qualified participant who meets the service
requirements of section 89 dies as a result of injury or illness
that does not arise out of and in the course of the qualified
participant's reporting unit service, a supplemental benefit shall
be granted equivalent to the amount provided for in section 89 had
the former qualified participant been considered retired under
section 89, which supplemental benefit shall be offset by the value
of the distribution of his or her accumulated balance upon becoming
a former qualified participant pursuant to section 135.
(5) A qualified participant, former qualified participant, or
beneficiary of a deceased participant, which participant is
eligible for a disability retirement allowance under this section,
is eligible for health insurance coverage under section 91 in all
respects and under the same terms as a retirant and his or her
beneficiaries under Tier 1.
Sec. 136. (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 132(2).
(b) The former qualified participant is at least 60 years of
age or has at least 25 years of credited service.
(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 91 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
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 under section 91.
(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 132(2)(a), and for his or
her health benefit dependents, the retirement system 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 the retirement
system under this subsection. The portion of the health insurance
coverage premium paid by the retirement system under this
subsection shall be as follows: if an individual described in this
subsection has 10 or more but less than 25 years of service credit
under this act and the individual 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 individual's or deceased
individual'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 an individual described in this subsection who receives a
disability retirement allowance under section 135a or to a health
benefit dependent beneficiary under section 135a.
(5) A former qualified participant who is eligible to elect
health insurance coverage under subsection (1) and who is vested in
those benefits under section 132(2)(b) may elect health insurance
coverage under section 91 for himself or herself and for his or her
health benefit dependents, in all respects and under the same terms
as would a retirant and his or her health insurance dependents
under Tier 1.
(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 91 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.
(7) If the department 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.
Sec. 137. (1) The right of a qualified participant or a former
qualified participant, or his or her beneficiaries, to a
distribution described in subsection (1) is subject to forfeiture
pursuant to the public employee retirement benefits forfeiture act,
1994 PA 350, MCL 38.2701 to 38.2705.
(2) The director has the right of setoff to recover
overpayments made under this article and to satisfy any claims
arising from embezzlement or fraud committed by a qualified
participant, former qualified participant, refund beneficiary, or
other person who has a claim to a distribution or any other benefit
from Tier 2.
(3) The director shall correct errors in the records and
actions under this article, and shall seek to recover overpayments
and shall make up underpayments.
