SENATE BILL No. 1307

June 7, 2000, Introduced by Senator BYRUM and referred to the Committee on

Appropriations.

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 61a.

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

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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 and who HE 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 61A.

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

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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

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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 the

8 Public Acts of 1980, being sections 38.1301 to 38.1408 of the

9 Michigan Compiled Laws 1980 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-

13 tions 38.2101 to 38.2608 of the Michigan Compiled Laws 1992

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 sections

18 38.1601 to 38.1648 of the Michigan Compiled Laws 1986 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 61A. 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.

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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.

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1 (b) A summer youth employment program established pursuant

2 to the Michigan youth corps act, Act No. 69 of the Public Acts

3 of 1983, being sections 409.221 to 409.229 of the Michigan

4 Compiled Laws 1983 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 of Act No. 259 of the Public Acts of 1983 FORMER

10 1983 PA 259.

11 (e) A program established pursuant to the Michigan community

12 service corps program, first established under sections 25 to 35

13 of Act No. 259 of the Public Acts of 1983 FORMER 1983 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

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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 who before March 31, 1997 would have been eligible DOES NOT

21 ELECT to be a member of Tier 1 UNDER SECTION 61A.

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

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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. 61A. (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 AFTER HIS OR HER EMPLOYMENT. THE EMPLOYER SHALL

9 PROVIDE WRITTEN INFORMATION TO THE INDIVIDUAL ABOUT THE TIER 1

10 AND TIER 2 PLANS CLEARLY DESCRIBING EACH PLAN. AN ELECTION MADE

11 BY AN INDIVIDUAL UNDER THIS SUBSECTION IS IRREVOCABLE. AN INDI-

12 VIDUAL WHO DOES NOT MAKE A WRITTEN ELECTION OR WHO DOES NOT FILE

13 THE ELECTION DURING THE PERIOD SPECIFIED IN THIS SUBSECTION IS

14 CONSIDERED TO HAVE ELECTED TO BECOME A MEMBER OF TIER 1.

15 (2) THE RETIREMENT SYSTEM SHALL PROVIDE AN OPPORTUNITY FOR

16 EACH QUALIFIED PARTICIPANT WHO IS A QUALIFIED PARTICIPANT ON THE

17 EFFECTIVE DATE OF THIS SECTION TO ELECT IN WRITING TO TERMINATE

18 PARTICIPATION IN TIER 2 AND ELECT TO BECOME A MEMBER IN TIER 1.

19 AN ELECTION MADE BY A QUALIFIED PARTICIPANT UNDER THIS SUBSECTION

20 IS IRREVOCABLE. THE RETIREMENT SYSTEM SHALL ACCEPT WRITTEN ELEC-

21 TIONS UNDER THIS SUBSECTION FROM QUALIFIED PARTICIPANTS DURING A

22 60-DAY PERIOD BEGINNING 90 DAYS AFTER THE EFFECTIVE DATE OF THIS

23 SECTION. A QUALIFIED PARTICIPANT WHO DOES NOT MAKE A WRITTEN

24 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

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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

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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 DATE 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, THAT HAS VESTED TO THE EMPLOYEE UNDER

18 SECTION 64, AS OF THE DATE OF TRANSFER, TO THE EMPLOYEES' SAVINGS

19 FUND.

20 (C) THE PORTION OF THE PARTICIPANT'S ACCUMULATED BALANCE

21 ATTRIBUTABLE TO EMPLOYER CONTRIBUTIONS AND EARNINGS ON THOSE CON-

22 TRIBUTIONS, IF ANY, THAT HAS NOT VESTED TO THE EMPLOYEE UNDER

23 SECTION 64, AS OF THE DATE OF TRANSFER, TO THE EMPLOYER'S ACCUMU-

24 LATION FUND.

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