HOUSE BILL No. 5807 April 29, 1998, Introduced by Reps. DeHart, Schermesser, Vaughn, Hale, Quarles, Baade, Anthony, Wetters, Martinez, Bogardus, Cherry, Baird, Scott, Rocca, Basham, Tesanovich and Kelly and referred to the Committee on Public Retirement. A bill to amend 1943 PA 240, entitled "State employees' retirement act," by amending sections 1i, 13, and 55 (MCL 38.1i, 38.13, and 38.55), sections 1i and 13 as amended and section 55 as added by 1996 PA 487, and by adding section 56a. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 1i. (1) "Service" means service rendered to this state 2 by an elected or appointed state official or employee of this 3 state. Credit for service shall be determined by appropriate 4 rules and regulations of the retirement board, but not more than 5 1 year of service shall be creditable for all service in 1 calen- 6 dar year. The retirement board shall not allow credit for serv- 7 ice for any period of more than 1 month in any 1 calendar year 8 during which the employee was absent without pay. However, full 9 service credit shall be given for a period during which an 05995'98 KKR 2 1 employee is on leave of absence and is receiving worker's 2 compensation benefits as the result of a duty-incurred 3 disability. Full service credit shall also be given to an 4 employee for required 1-day layoffs, for voluntary or involuntary 5 participation in pay reduction plan A, pay reduction plan B, or 6 both, in effect during the fiscal years ending on and after 7 September 30, 1981, and for required and designated temporary 8 layoffs. 9 (2) "State treasurer" means the treasurer of this state. 10 (3) "Tier 1" means the retirement plan available to a member 11 under this act who MEETS 1 OF THE FOLLOWING REQUIREMENTS: 12 (A) THE INDIVIDUAL was first employed and entered upon the 13 payroll before March 31, 1997 andwhoHE OR SHE does not elect 14 to become a qualified participant of Tier 2 UNDER SECTION 50. 15 (B) THE INDIVIDUAL WAS FIRST EMPLOYED AND ENTERED UPON THE 16 PAYROLL ON OR AFTER MARCH 31, 1997 AND HE OR SHE ELECTS TO BECOME 17 A MEMBER OF TIER 1 UNDER SECTION 56A. 18 (4) "Tier 2" means the retirement plan established pursuant 19 to section 401(k) of the internal revenue code that is available 20 to qualified participants under sections 50 to 69. 21 Sec. 13. (1) Except as otherwise provided in this act, mem- 22 bership in the retirement system consists of state employees 23 occupying permanent positions in the state civil service. All 24 state employees except those specifically excluded by law and 25 those who are members or eligible to be members of other statu- 26 tory retirement systems in this state, shall become members of 27 the retirement system. The employees may use service previously 05995'98 3 1 performed as an employee of this state in meeting the service 2 requirements for the retirement allowances and death benefits 3 provided by the retirement system. However, the prior service 4 shall not be used in computing the amount of a retirement allow- 5 ance to be paid by the retirement system unless the employee pays 6 to the retirement system the amount the employee's contributions 7 would have been had the employee become a member immediately upon 8 employment by the state with interest compounded annually at the 9 regular rate from a date 1 year after the date of employment by 10 this state to the date of payment. A person who draws compensa- 11 tion as a state employee of a political subdivision of this state 12 is eligible for the benefits provided by this act to the extent 13 of the person's compensation paid by this state. An individual 14 who meets the requirements of section 44a is a member of the 15 retirement system. 16 (2) Elected or appointed state officials may elect not to 17 become or continue as members of the retirement system by filing 18 written notice with the retirement board. An appointed state 19 official who is a member of a state board, commission, or council 20 and who receives a per diem rate in his or her capacity as a 21 member of the board, commission, or council is excluded from mem- 22 bership in the retirement system for the service rendered in his 23 or her capacity as a member of the board, commission, or 24 council. Service performed by an elected or appointed official 25 during the time the official elects not to participate shall not 26 be used in meeting the service requirement or in computing the 27 amount of retirement allowance to be paid by the retirement 05995'98 4 1 system. A member who elects not to participate shall be refunded 2 all contributions made before the election. 3 (3) Membership in the retirement system does not include any 4 of the following: 5 (a) A person who is a contributing member in the public 6 school employees' retirement system provided for in the public 7 school employees retirement act of 1979,Act No. 300 of the8Public Acts of 1980, being sections 38.1301 to 38.1408 of the9Michigan Compiled Laws1980 PA 300, MCL 38.1301 TO 38.1408. 10 (b) A person who is a contributing member in the Michigan 11 judges retirement system provided for in the judges retirement 12 act of 1992,Act No. 234 of the Public Acts of 1992, being sec-13tions 38.2101 to 38.2608 of the Michigan Compiled Laws1992 14 PA 234, MCL 38.2101 TO 38.2670. 15 (c) A person who comes within the Michigan state police 16 retirement system provided for in the state police retirement act 17 of 1986,Act No. 182 of the Public Acts of 1986, being sections1838.1601 to 38.1648 of the Michigan Compiled Laws1986 PA 182, 19 MCL 38.1601 TO 38.1648. 20 (d) An individual who is first employed and entered upon the 21 payroll on or after March 31, 1997 for employment for which the 22 individual would have been eligible for membership under this 23 section before March 31, 1997, UNLESS THAT INDIVIDUAL ELECTS TO 24 BECOME A MEMBER OF TIER 1 UNDER SECTION 56A. An individual 25 described in this subdivision WHO DOES NOT MAKE THE ELECTION TO 26 BECOME A MEMBER OF TIER 1 is eligible to be a qualified 27 participant in Tier 2 subject to sections 50 to 69. 05995'98 5 1 (e) An individual who elects to terminate membership under 2 section 50 and who, but for that election, would otherwise be 3 eligible for membership in Tier 1 under this section. 4 (4) A person who is hired in state classified or unclassi- 5 fied service after June 30, 1974, who is first employed and 6 entered upon the payroll before March 31, 1997, and who possesses 7 a Michigan teaching certificate shall be a member of this retire- 8 ment system. After June 30, 1974, but before March 31, 1997, a 9 person who returns to state employment in the classified or 10 unclassified service who previously was a contributing member of 11 the Michigan public school employees' retirement system shall 12 have the person's accumulated contributions and service trans- 13 ferred to this retirement system, or having withdrawn the contri- 14 butions, may pay into the retirement system the amount withdrawn 15 together with regular interest and have credit restored as pro- 16 vided for in section 16. On and after March 31, 1997, an indi- 17 vidual described in this subsection who returns to state service 18 shall make an irrevocable election to remain in Tier 1 or to 19 become a qualified participant of Tier 2 in the manner prescribed 20 in section 50. 21 (5) A person, not regularly employed by this state, who is 22 employed through participation in 1 or more of the following pro- 23 grams, shall not be a member of the retirement system and shall 24 not receive service credit for the employment: 25 (a) A program authorized, undertaken, and financed pursuant 26 to the comprehensive employment and training act of 1973, former 27 Public Law 93-203, 87 Stat. 839. 05995'98 6 1 (b) A summer youth employment program established pursuant 2 to the Michigan youth corps act,Act No. 69 of the Public Acts3of 1983, being sections 409.221 to 409.229 of the Michigan4Compiled Laws1983 PA 69, MCL 409.221 TO 409.229. 5 (c) A program established pursuant to the job training part- 6 nership act, Public Law 97-300, 96 Stat. 1322. 7 (d) A program established pursuant to the Michigan opportu- 8 nity and skills training program, first established under sec- 9 tions 12 to 23 ofAct No. 259 of the Public Acts of 19831983 10 PA 259. 11 (e) A program established pursuant to the Michigan community 12 service corps program, first established under sections 25 to 35 13 ofAct No. 259 of the Public Acts of 19831983 PA 259. 14 (6) A person, not regularly employed by this state, who is 15 employed to administer a program described in subsection (5) 16 shall not be a member of the retirement system and shall not 17 receive service credit for the employment. 18 (7) If a person described in subsection (5)(a) later becomes 19 a member of this retirement system within 12 months after the 20 date of termination as a participant in a transitional public 21 employment program, service credit shall be given for employment 22 which is excluded in subsection (5) for purposes of determining a 23 retirement allowance upon the payment by the person's employer 24 under subsection (5) from funds provided under the comprehensive 25 employment and training act of 1973, former Public Law 93-203, 26 87 Stat. 839, as funds permit, to the retirement system of the 27 contributions, plus regular interest, the employer would have 05995'98 7 1 paid had the employment been rendered in a position covered by 2 this act. During the person's employment in the transitional 3 public employment program, the person's employer shall place in 4 reserve a reasonable but not necessarily an actuarially deter- 5 mined amount equal to the contributions that the employer would 6 have paid to the retirement system for those employees in the 7 transitional public employment program as if they were members 8 under this act, but only for that number of employees that the 9 employer determined would move from the transitional public 10 employment program into positions covered by this act. If the 11 funds provided under the comprehensive employment and training 12 act of 1973, former Public Law 93-203, 87 Stat. 839, are insuffi- 13 cient, the remainder of the employer contributions shall be paid 14 by the person's current employer. 15 Sec. 55. (1) "Qualified participant" means an individual 16 who is a participant of Tier 2 and who meets 1 of the following 17 requirements: 18 (a) An individual who is first employed and entered upon the 19 payroll of his or her employer on or after March 31, 1997, and 20 whobefore March 31, 1997 would have been eligibleDOES NOT 21 ELECT to be a member of Tier 1 UNDER SECTION 56A. 22 (b) An individual who elects to terminate membership in Tier 23 1 and who elects to participate in Tier 2 in the manner pre- 24 scribed in section 50. 25 (2) "Refund beneficiary" means an individual nominated by a 26 qualified participant or a former qualified participant under 05995'98 8 1 section 66 to receive a distribution of the participant's 2 accumulated balance in the manner prescribed in section 67. 3 (3) "State treasurer" means the treasurer of this state. 4 SEC. 56A. (1) AN INDIVIDUAL WHO IS FIRST EMPLOYED AND 5 ENTERED UPON THE PAYROLL OF HIS OR HER EMPLOYER ON OR AFTER THE 6 EFFECTIVE DATE OF THIS SECTION SHALL ELECT IN WRITING TO BECOME A 7 MEMBER OF TIER 1 OR TO BECOME A QUALIFIED PARTICIPANT IN TIER 2 8 WITHIN 30 DAYS OF HIS OR HER EMPLOYMENT. AN ELECTION MADE BY AN 9 INDIVIDUAL UNDER THIS SUBSECTION IS IRREVOCABLE. AN INDIVIDUAL 10 WHO DOES NOT MAKE A WRITTEN ELECTION OR WHO DOES NOT FILE THE 11 ELECTION DURING THE PERIOD SPECIFIED IN THIS SUBSECTION IS CON- 12 SIDERED TO HAVE ELECTED TO BECOME A QUALIFIED PARTICIPANT OF TIER 13 2. 14 (2) THE RETIREMENT SYSTEM SHALL PROVIDE AN OPPORTUNITY FOR 15 EACH QUALIFIED PARTICIPANT WHO IS A QUALIFIED PARTICIPANT ON THE 16 EFFECTIVE DATE OF THIS SECTION TO ELECT IN WRITING TO TERMINATE 17 PARTICIPATION IN TIER 2 AND ELECT TO BECOME A MEMBER IN TIER 1. 18 AN ELECTION MADE BY A QUALIFIED PARTICIPANT UNDER THIS SUBSECTION 19 IS IRREVOCABLE. THE RETIREMENT SYSTEM SHALL ACCEPT WRITTEN ELEC- 20 TIONS UNDER THIS SUBSECTION FROM QUALIFIED PARTICIPANTS DURING 21 THE PERIOD BEGINNING ON THE EFFECTIVE DATE OF THIS SECTION AND 22 ENDING UPON THE EXPIRATION OF 60 DAYS AFTER THE EFFECTIVE DATE OF 23 THIS SECTION. A QUALIFIED PARTICIPANT WHO DOES NOT MAKE A WRIT- 24 TEN ELECTION OR WHO DOES NOT FILE THE ELECTION DURING THE PERIOD 25 SPECIFIED IN THIS SUBSECTION CONTINUES TO BE A QUALIFIED PARTICI- 26 PANT OF TIER 2. A QUALIFIED PARTICIPANT WHO MAKES AND FILES A 05995'98 9 1 WRITTEN ELECTION UNDER THIS SUBSECTION ELECTS TO DO ALL OF THE 2 FOLLOWING: 3 (A) CEASE TO BE A MEMBER OF TIER 2 EFFECTIVE 12 MIDNIGHT ON 4 THE DAY BEFORE THE FIRST DAY OF THE PAYROLL PERIOD THAT FOLLOWS 5 THE EXPIRATION OF 90 DAYS AFTER THE EFFECTIVE DATE OF THIS 6 SECTION. 7 (B) BECOME A MEMBER OF TIER 1 EFFECTIVE 12:01 A.M. ON THE 8 FIRST DAY OF THE PAYROLL PERIOD DESCRIBED IN SUBDIVISION (A). 9 (C) WAIVE ALL OF HIS OR HER RIGHTS TO A BENEFIT UNDER TIER 2 10 ON THE DATE HE OR SHE BECOMES A MEMBER OF TIER 1. 11 (3) AFTER CONSULTATION WITH THE RETIREMENT SYSTEM'S ACTUARY 12 AND THE RETIREMENT BOARD, THE DEPARTMENT OF MANAGEMENT AND BUDGET 13 SHALL DETERMINE THE METHOD BY WHICH AN INDIVIDUAL SHALL MAKE A 14 WRITTEN ELECTION UNDER THIS SECTION. IF THE INDIVIDUAL IS MAR- 15 RIED AT THE TIME OF THE ELECTION, THE ELECTION IS NOT EFFECTIVE 16 UNLESS THE ELECTION IS SIGNED BY THE INDIVIDUAL'S SPOUSE. 17 HOWEVER, THE RETIREMENT BOARD MAY WAIVE THIS REQUIREMENT IF THE 18 SPOUSE'S SIGNATURE CANNOT BE OBTAINED BECAUSE OF EXTENUATING 19 CIRCUMSTANCES. 20 (4) AN ELECTION UNDER THIS SECTION IS SUBJECT TO THE ELIGI- 21 BLE DOMESTIC RELATIONS ORDER ACT, 1991 PA 46, MCL 38.1701 TO 22 38.1711. 23 (5) IF THE DEPARTMENT OF MANAGEMENT AND BUDGET RECEIVES 24 NOTIFICATION FROM THE UNITED STATES INTERNAL REVENUE SERVICE THAT 25 THIS SECTION OR ANY PORTION OF THIS SECTION WILL CAUSE THE 26 RETIREMENT SYSTEM TO BE DISQUALIFIED FOR TAX PURPOSES UNDER THE 05995'98 10 1 INTERNAL REVENUE CODE, THEN THE PORTION THAT WILL CAUSE THE 2 DISQUALIFICATION DOES NOT APPLY. 3 (6) FOR A QUALIFIED PARTICIPANT WHO ELECTS TO TERMINATE PAR- 4 TICIPATION IN TIER 2 UNDER SUBSECTION (2), THE RETIREMENT SYSTEM 5 SHALL DIRECT THE STATE TREASURER TO TRANSFER THE QUALIFIED 6 PARTICIPANT'S ACCUMULATED BALANCE TO THE APPROPRIATE FUND CREATED 7 UNDER SECTION 11 ON OR BEFORE THE EXPIRATION OF 120 DAYS AFTER 8 THE EFFECTIVE DATE OF THIS SECTION. THE RETIREMENT SYSTEM SHALL 9 CALCULATE THE AMOUNT TO BE TRANSFERRED, WHICH SHALL BE EQUAL TO 10 THE SUM OF THE FOLLOWING: 11 (A) THE PORTION OF THE PARTICIPANT'S ACCUMULATED BALANCE 12 ATTRIBUTABLE TO EMPLOYEE CONTRIBUTIONS AND EARNINGS ON THOSE CON- 13 TRIBUTIONS, IF ANY, AS OF THE DAY OF TRANSFER, TO THE EMPLOYEES' 14 SAVINGS FUND. 15 (B) THE PORTION OF THE PARTICIPANT'S ACCUMULATED BALANCE 16 ATTRIBUTABLE TO EMPLOYER CONTRIBUTIONS AND EARNINGS ON THOSE CON- 17 TRIBUTIONS, IF ANY, AS OF THE DAY OF TRANSFER, TO THE EMPLOYER'S 18 ACCUMULATION FUND. 05995'98 Final page. KKR