SENATE BILL NO. 1048 April 14, 1998, Introduced by Senator YOUNG and referred to the Committee on Appropriations. A bill to amend 1957 PA 261, entitled "Michigan legislative retirement system act," by amending sections 50a, 61, and 62 (MCL 38.1050a, 38.1061, and 38.1062), section 50a as amended by 1994 PA 359 and sections 61 and 62 as added by 1996 PA 486. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 50a. (1) The grants and insurance revolving fund is 2 created in the state treasury as a separate fund, into which 3 shall be paid legislative grants, earnings from the fund, pay- 4 ments by or on behalf of members, and revenue from other sources 5 accepted by the board. Money appropriated to the grants and 6 insurance revolving fund shall not revert to the general fund at 7 the close of the fiscal year but shall remain in the grants and 8 insurance revolving fund. The legislative grants in the grants 9 and insurance revolving fund shall not be expended except upon 06289'98 KKR 2 1 express direction of the legislature; but all other money in the 2 grants and insurance revolving fund may be expended for the pur- 3 poses and in the manner provided in this section. 4 (2) Beginning with salary received that is attributable to 5 service performed on and after January 1, 1995, each legislator 6 or member shall pay a sum equal to 0.5% of salary common to all 7 members to the grants and insurance revolving fund to be eligible 8 for the benefits provided in this section. The sum shall be col- 9 lected by payroll deductions in the manner prescribed in this 10 act. 11 (3) The board shall self-insure or shall purchase and pay 12 the premiums on a life insurance policy or policies to provide 13 life insurance death or other benefits for retirants, deferred 14 vested members, and the spouses, eligible children, or eligible 15 beneficiaries of retirants and deferred vested members from the 16 amounts paid pursuant to subsection (2) for this purpose to the 17 grants and insurance revolving fund. Life insurance benefits 18 provided on June 23, 1987 shall not be diminished due to the 19 amendments to this section byAct No. 58 of the Public Acts of2019871987 PA 58. 21(4) A member or deferred vested member, upon application to22retire under this act, shall elect to have the board provide life23insurance benefits under this section or to have the actuarial24present value of the life insurance benefits as of the date of25retirement used to purchase an additional monthly life annuity26for the member or deferred vested member. The election under27this section made by the member or deferred vested member is06289'98 3 1irrevocable. If the member or deferred vested member elects an2annuity under this section, the person's spouse and any person3previously designated as a beneficiary of a life insurance policy4by a member or a deferred vested member under this section shall5sign a statement prepared by the retirement board acknowledging6the election of the member. The additional monthly life annuity7shall be paid from the grants and insurance revolving fund.8 Sec. 61. (1) The retirement system shall provide an oppor- 9 tunity for each member who is a member on March 30, 1997, to 10 elect in writing to terminate membership in Tier 1 and elect to 11 become a qualified participant in Tier 2. An election made by a 12 member under this subsection is irrevocable. The retirement 13 system shall accept written elections under this subsection from 14 members during the period beginning on January 2, 1998 and ending 15 onAprilNOVEMBER 30, 1998. A member who does not make a writ- 16 ten election or who does not file the election during the period 17 specified in this subsection continues to be a member of Tier 1. 18 A member who makes and files a written election under this sub- 19 section elects to do all of the following: 20 (a) Cease to be a member of Tier 1 effective 12 midnight May 21 31, 1998. 22 (b) Become a qualified participant in Tier 2 effective 12:01 23 a.m., June 1, 1998. 24 (c) Except as otherwise provided in this subdivision, waive 25 all of his or her rights to a pension, an annuity, a retirement 26 allowance, an insurance benefit, or any other benefit underthis27actTIER 1 effective 12 midnight May 31, 1998. This subdivision 06289'98 4 1 does not affect a person's right to health benefits provided 2 under this act pursuant to section 79. 3 (2) If an individual who was a deferred vested member on 4 March 30, 1997, or an individual who was a former nonvested 5 member on March 30, 1997 becomes a legislator or lieutenant gov- 6 ernor and is again eligible for membership in Tier 1, the indi- 7 vidual shall elect in writing to remain a member of Tier 1 or to 8 terminate membership in Tier 1 and become a qualified participant 9 in Tier 2. An election made by a deferred vested member or a 10 former nonvested member under this subsection is irrevocable. 11 The retirement system shall accept written elections under this 12 subsection from a deferred vested member or a former nonvested 13 member during the period beginning on the date of the 14 individual's eligibility for membership and ending upon the expi- 15 ration of 60 days after the date of that eligibility. A deferred 16 vested member or former nonvested member who makes and files a 17 written election to remain a member of Tier 1 retains all rights 18 and is subject to all conditions as a member of Tier 1 under this 19 act. A deferred vested member or former nonvested member who 20 does not make a written election or who does not file the elec- 21 tion during the period specified in this subsection continues to 22 be a member of Tier 1. A deferred vested member or former non- 23 vested member who makes and files a written election to terminate 24 membership in Tier 1 elects to do all of the following: 25 (a) Cease to be a member of Tier 1 effective 12 midnight on 26 the last day of the payroll period that includes the date of the 27 election. 06289'98 5 1 (b) Become a qualified participant in Tier 2 effective 12:01 2 a.m. on the first day of the payroll period immediately following 3 the date of the election. 4 (c) Except as otherwise provided in this subdivision, waive 5 all of his or her rights to a pension, an annuity, a retirement 6 allowance, an insurance benefit, or any other benefit under Tier 7 1 effective 12 midnight on the last day of the payroll period 8 that includes the date of the election. This subdivision does 9 not affect an individual's right to health benefits provided 10 under this act pursuant to section 79. 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 a member, deferred vested 14 member, or former nonvested member shall make a written election 15 under this section. If the member, deferred vested member, or 16 former nonvested member is married at the time of the election, 17 the election is not effective unless the election is signed by 18 the individual's spouse. However, the retirement board may waive 19 this requirement if the spouse's signature cannot be obtained 20 because of extenuating circumstances. 21 (4) An election under this section is subject to the eligi- 22 ble domestic relations order act,Act No. 46 of the Public Acts23of 1991, being sections 38.1701 to 38.1711 of the Michigan24Compiled Laws1991 PA 46, MCL 38.1701 TO 38.1711. 25 (5) If the department of management and budget receives 26 notification from the United States internal revenue service that 27 this section or any portion of this section will cause the 06289'98 6 1 retirement system to be disqualified for tax purposes under the 2 internal revenue code, then the portion that will cause the dis- 3 qualification does not apply. 4 Sec. 62. (1) For a member who elects to terminate member- 5 ship in Tier 1 under section 61(1), the retirement system shall 6 direct the state treasurer to transfer a lump sum amount from the 7 appropriate fund created under this act to the qualified 8 participant's account in Tier 2 on or beforeSeptember 30, 19989 APRIL 30, 1999. The retirement system shall calculate the amount 10 to be transferred, which shall be equal to the sum of the 11 following: 12 (a) The member's accumulated contributions, if any, from the 13 member's savings fund as of 12 midnight May 31, 1998. 14 (b) For a member who is vested under section 23(1)(a) as of 15 12 midnight on May 31, 1998, the excess, if any, of the actuarial 16 present value of the member's accumulated benefit obligation, 17 over the amount specified in subdivision (a), from the member's 18 retirement fund. Except as provided in subsection (5), for the 19 purposes of this subsection, the present value of the member's 20 accumulated benefit obligation is based upon the member's esti- 21 mated credited service and estimated final salary as of 12 mid- 22 night on May 31, 1998. The actuarial present value shall be com- 23 puted as of 12 midnight May 31, 1998 and shall be based on the 24 following: 25 (i) Eight percent effective annual interest, compounded 26 annually. 06289'98 7 1 (ii) A 50% male and 50% female gender neutral blend of the 2 mortality tables used to project retirant longevity in the most 3 recent actuarial valuation report. 4 (iii) A benefit commencement age, based upon the member's 5 estimated credited service as of 12 midnight May 31, 1998. The 6 benefit commencement age shall be the younger of the following, 7 but shall not be younger than the member's age as of 12 midnight 8 May 31, 1998: 9 (A) Age 55. 10 (B) Age 50, if the member's estimated credited service 11 equals or exceeds 20 years. 12 (c) Interest on any amounts determined in subdivisions (a) 13 and (b), from June 1, 1998 to the date of the transfer, based 14 upon 8% annual interest, compounded annually. 15 (2) For each member who elects to terminate membership in 16 the retirement system under section 61(1), the retirement system 17 shall recompute the amount transferred under subsection (1) not 18 later thanNovember 30, 1998JUNE 30, 1999 based upon the 19 member's actual credited service and actual final salary as of 12 20 midnight May 31, 1998. If the recomputed amount differs from the 21 amount transferred under subsection (1) by $10.00 or more, not 22 later thanDecember 15, 1998JULY 15, 1999, the retirement 23 system shall do all of the following: 24 (a) Direct the state treasurer to transfer from the members' 25 retirement fund to the qualified participant's account in Tier 2 26 the excess, if any, of the recomputed amount over the previously 27 transferred amount together with interest from 12 midnight May 06289'98 8 1 31, 1998 to the date of the transfer under this subsection, based 2 upon 8% effective annual interest, compounded annually. 3 (b) Direct the state treasurer to transfer from the quali- 4 fied participant's account in Tier 2 to the members' retirement 5 fund the excess, if any, of the previously transferred amount 6 over the recomputed amount, together with interest, from the date 7 of the transfer made under subsection (1), based upon 8% effec- 8 tive annual interest, compounded annually. 9 (3) For a deferred vested member who elects to terminate 10 membership in this retirement system under section 61(2), the 11 retirement system shall direct the state treasurer to transfer a 12 lump sum amount from the appropriate fund created under this act 13 to the qualified participant's account in Tier 2 on or before the 14 expiration of 60 days after the date of the individual's termina- 15 tion of employment. The retirement system shall calculate the 16 amount to be transferred, which shall be equal to the sum of the 17 following: 18 (a) The deferred vested member's accumulated contributions, 19 if any, from the members' savings fund as of 12 midnight on the 20 last day of the payroll period that includes the date of the 21 election. 22 (b) The excess, if any, of the actuarial present value of 23 the deferred vested member's accumulated benefit obligation, over 24 the amount specified in subdivision (a), from the members' 25 retirement fund. Except as provided in subsection (5), for the 26 purposes of this subsection, the present value of the deferred 27 vested member's accumulated benefit obligation is based upon the 06289'98 9 1 deferred vested member's estimated credited service and estimated 2 final salary as of 12 midnight on the last day of the payroll 3 period that includes the date of the election. The actuarial 4 present value shall be computed as of 12 midnight on that date 5 and shall be based on the following: 6 (i) Eight percent effective annual interest, compounded 7 annually. 8 (ii) A 50% male and 50% female gender neutral blend of the 9 mortality tables used to project retirant longevity in the most 10 recent annual actuarial valuation report. 11 (iii) A benefit commencement age, based upon the member's 12 estimated credited service as of 12 midnight on the last day of 13 the payroll period that includes the date of the election. The 14 benefit commencement age shall be the younger of the following, 15 but shall not be younger than the member's age as of 12 midnight 16 on the last day of the payroll period that includes the date of 17 the election: 18 (A) Age 55. 19 (B) Age 50, if the deferred member's estimated credited 20 service equals or exceeds 20 years. 21 (c) Interest on any amounts determined in subdivisions (a) 22 and (b), from the first day of the payroll period immediately 23 following the date of the election to the date of the transfer, 24 based upon 8% effective annual interest, compounded annually. 25 (4) For each deferred vested member who elects to terminate 26 membership in Tier 1 under section 61(2), the retirement system 27 shall recompute the amount transferred under subsection (3) not 06289'98 10 1 later than the expiration of 90 days after the transfer occurs 2 under subsection (3) based upon the deferred vested member's 3 actual credited service and actual final salary as of 12 midnight 4 on the last day of the payroll period that includes the date of 5 the election. If the recomputed amount differs from the amount 6 transferred under subsection (3) by $10.00 or more, the retire- 7 ment system shall do all of the following: 8 (a) Direct the state treasurer to transfer from the member's 9 retirement fund to the qualified participant's account in Tier 2 10 the excess, if any, of the recomputed amount over the previously 11 transferred amount together with interest from 12 midnight on the 12 last day of the payroll period that includes the date of the 13 election to the date of the transfer under this subsection, based 14 upon 8% effective annual interest, compounded annually. 15 (b) Direct the state treasurer to transfer from the quali- 16 fied participant's account in Tier 2 to the members' retirement 17 fund the excess, if any, of the previously transferred amount 18 over the recomputed amount, together with interest, from the date 19 of the transfer made under subsection (4), based upon 8% effec- 20 tive annual interest, compounded annually. 21 (5) For the purposes of subsections (1) to (4), the calcula- 22 tion of estimated and actual present value of the member's or 23 deferred vested member's accumulated benefit obligation shall be 24 based upon methods adopted by the department of management and 25 budget and the retirement system's actuary in consultation with 26 the retirement board. The retirement system shall utilize the 27 same actuarial valuation report used to calculate the amount 06289'98 11 1 transferred under subsection (1) or (3) when making the 2 recomputation required under subsection (2) or (4). Estimated 3 and actual final salary shall be determined as provided in sec- 4 tion 9 as of 12 midnight on the date the member or deferred 5 member ceases to be a member of Tier 1 under section 61. 6 (6) For a former nonvested member who elects to terminate 7 membership in Tier 1 under section 61(2) and who has accumulated 8 contributions standing to his or her credit in the members' sav- 9 ings fund, the retirement system shall direct the state treasurer 10 to transfer a lump sum amount from the members' savings fund cre- 11 ated under section 21 to the qualified participant's account in 12 Tier 2 on or before the expiration of 60 days after the date of 13 the individual's election to terminate membership. The retire- 14 ment system shall calculate the amount to be transferred, which 15 shall be equal to the sum of the following: 16 (a) The former nonvested member's accumulated contributions, 17 if any, from the members' savings fund as of 12 midnight on the 18 last day of the payroll period that includes the date of the 19 election. 20 (b) Interest on any amounts determined in subdivision (a), 21 from the first day of the payroll period immediately following 22 the date of the election to the date of the transfer, based upon 23 8% effective annual interest, compounded annually. 24 (7) If the department of management and budget receives 25 notification from the United States internal revenue service that 26 this section or any portion of this section will cause the 27 retirement system to be disqualified for tax purposes under the 06289'98 12 1 internal revenue code, then the portion that will cause the 2 disqualification does not apply. 06289'98 Final page. KKR