SENATE BILL NO. 605 May 18, 1999, Introduced by Senator VAN REGENMORTER and referred to the Committee on Judiciary. A bill to amend 1992 PA 234, entitled "The judges retirement act of 1992," by amending sections 701, 702, 705, 706, and 711 (MCL 38.2651, 38.2652, 38.2655, 38.2656, and 38.2661), sections 701 and 702 as amended by 1998 PA 66 and sections 705, 706, and 711 as added by 1996 PA 523. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 701. (1) The retirement system shall provide an oppor- 2 tunity for each member who is a member on March 30, 1997, to 3 elect in writing to terminate membership in Tier 1 and elect to 4 become a qualified participant in Tier 2. An election made by a 5 member under this subsection is irrevocable. The retirement 6 system shall accept written elections under this subsection from 7 members during the period beginning on January 2, 1998 and ending 8 on May 31, 1998. A member who does not make a written election 01332'99 * KKR 2 1 or who does not file the election during the period specified in 2 this subsection continues to be a member of Tier 1. A member who 3 makes and files a written election under this subsection elects 4 to do all of the following: 5 (a) Cease to be a member of Tier 1 effective 12 midnight 6 June 30, 1998. 7 (b) Become a qualified participant in Tier 2 effective 12:01 8 a.m., July 1, 1998. 9 (c) Except as otherwise provided in this subdivision, waive 10 all of his or her rights to a pension, an annuity, a retirement 11 allowance, an insurance benefit, or any other benefit under Tier 12 1 effective 12 midnight June 30, 1998. This subdivision does not 13 affect a person's right to health benefits provided under this 14 act pursuant to section 719. 15 (2) If an individual who was a vested former member on March 16 30, 1997, or an individual who was a former nonvested member on 17 March 30, 1997 becomes a judge or state official and is again 18 eligible for membership in Tier 1, the individual shall elect in 19 writing to remain a member of Tier 1 or to terminate membership 20 in Tier 1 and become a qualified participant in Tier 2. An elec- 21 tion made by a vested former member or a former nonvested member 22 under this subsection is irrevocable. The retirement system 23 shall accept written elections under this subsection from a 24 vested former member or a former nonvested member during the 25 period beginning on the date of the individual's eligibility for 26 membership and ending upon the expiration of 60 days after the 27 date of that eligibility. A vested former member or former 01332'99 * 3 1 nonvested member who makes and files a written election to remain 2 a member of Tier 1 retains all rights and is subject to all con- 3 ditions as a member of Tier 1 under this act. A vested former 4 member or former nonvested member who does not make a written 5 election or who does not file the election during the period 6 specified in this subsection continues to be a member of Tier 1. 7 A vested former member or former nonvested member who makes and 8 files a written election to terminate membership in Tier 1 elects 9 to do all of the following: 10 (a) Cease to be a member of Tier 1 effective 12 midnight on 11 the last day of the payroll period that includes the date of the 12 election. 13 (b) Become a qualified participant in Tier 2 effective 12:01 14 a.m. on the first day of the payroll period immediately following 15 the date of the election. 16 (c) Except as otherwise provided in this subdivision, waive 17 all of his or her rights to a pension, an annuity, a retirement 18 allowance, an insurance benefit, or any other benefit under Tier 19 1 effective 12 midnight on the last day of the payroll period 20 that includes the date of the election. This subdivision does 21 not affect an individual's right to health benefits provided 22 under this act pursuant to section 719. 23 (3) After consultation with the retirement system's actuary 24 and the retirement board, the department of management and budget 25 shall determine the method by which a member, vested former 26 member, or former nonvested member shall make a written election 27 under this section. If the member, vested former member, or 01332'99 * 4 1 former nonvested member is married at the time of the election, 2 the election is not effective unless the election is signed by 3 the individual's spouse. However, the retirement board may waive 4 this requirement if the spouse's signature cannot be obtained 5 because of extenuating circumstances. 6 (4) An election under this section is subject to the eligi- 7 ble domestic relations order act, 1991 PA 46, MCL 38.1701 to 8 38.1711. 9 (5) If the department of management and budget receives 10 notification from the United States internal revenue service that 11 this section or any portion of this section will cause the 12 retirement system to be disqualified for tax purposes under the 13 internal revenue code, then the portion that will cause the dis- 14 qualification does not apply. 15 (6) A JUDGE OF THE CIRCUIT COURT, PROBATE COURT, OR DISTRICT 16 COURT WHO WAS A MEMBER ON MARCH 30, 1997 AND WHO EITHER MADE AN 17 ELECTION UNDER THIS SECTION BUT WAS NOT ABLE TO HAVE THE ELECTION 18 IMPLEMENTED DUE TO THE RESTRAINING ORDER ENTERED IN MICHIGAN 19 JUDGES ASSN V TREASURER OF THE STATE OF MICHIGAN, CASE 20 NO. 98-DT-72771-CV (ED MI), OR WHO RETIRED BEFORE THE EFFECTIVE 21 DATE OF THE RESTRAINING ORDER MAY MAKE AN ELECTION IN THE MANNER 22 AND UNDER THE CONDITIONS PRESCRIBED IN THE STIPULATED ORDER 23 REGARDING TEMPORARY RESTRAINING ORDER IN MICHIGAN JUDGES ASSN V 24 TREASURER OF THE STATE OF MICHIGAN, CASE NO. 98-DT-72771-CV (ED 25 MI), ENTERED ON FEBRUARY 18, 1999. NOTWITHSTANDING ANY OTHER 26 PROVISION OF THIS SECTION TO THE CONTRARY, THE DEPARTMENT OF 01332'99 * 5 1 MANAGEMENT AND BUDGET AND THE TIER 2 PLAN ADMINISTRATOR SHALL 2 DETERMINE THE METHOD BY WHICH THIS SUBSECTION IS IMPLEMENTED. 3 Sec. 702. (1) For a member who elects to terminate member- 4 ship in Tier 1 under section 701(1), the retirement system shall 5 direct the state treasurer to transfer a lump sum amount from the 6 appropriate fund created under this act to the qualified 7 participant's account in Tier 2 on or beforeOctober 31, 19988 THE EXPIRATION OF 5 MONTHS AFTER THE TEMPORARY RESTRAINING ORDER 9 IS NO LONGER IN EFFECT. The retirement system shall calculate 10 the amount to be transferred, which shall be equal to the sum of 11 the following: 12 (a) The member's accumulated contributions, if any, from the 13 reserve for member contributions as of 12 midnight June 30, 14 1998. 15 (b) For a member who is vested under section 501(1) as of 12 16 midnight on June 30, 1998, the excess, if any, of the actuarial 17 present value of the member's accumulated benefit obligation, 18 over the amount specified in subdivision (a), from the reserve 19 for employer contributions. Except as provided in subsection 20 (5), for the purposes of this subsection, the present value of 21 the member's accumulated benefit obligation is based upon the 22 member's estimated credited service and estimated final salary as 23 of 12 midnight on June 30, 1998. The actuarial present value 24 shall be computed as of 12 midnight June 30, 1998 and shall be 25 based on the following: 26 (i) Eight percent effective annual interest, compounded 27 annually. 01332'99 * 6 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 June 30, 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 June 30, 1998: 9 (A) Age 60. 10 (B) Age 55, if the member's estimated credited service 11 equals or exceeds 18 years. 12 (C) The member's age, if the member's estimated credited 13 service equals or exceeds 25 years. 14 (c) Interest on any amounts determined in subdivisions (a) 15 and (b), from July 1, 1998 to the date of the transfer, based 16 upon 8% annual interest, compounded annually. 17 (2) For each member who elects to terminate membership in 18 the retirement system under section 701(1), the retirement system 19 shall recompute the amount transferred under subsection (1) not 20 later thanDecember 31, 1998THE EXPIRATION OF 7 MONTHS AFTER 21 THE TEMPORARY RESTRAINING ORDER IS NO LONGER IN EFFECT, based 22 upon the member's actual credited service and actual final salary 23 as of 12 midnight June 30, 1998. If the recomputed amount dif- 24 fers from the amount transferred under subsection (1) by $10.00 25 or more, not later thanJanuary 15, 1999THE EXPIRATION OF 8 26 MONTHS AFTER THE TEMPORARY RESTRAINING ORDER IS NO LONGER IN 27 EFFECT, the retirement system shall do all of the following: 01332'99 * 7 1 (a) Direct the state treasurer to transfer from the reserve 2 for employer contributions to the qualified participant's account 3 in Tier 2 the excess, if any, of the recomputed amount over the 4 previously transferred amount together with interest from 12 mid- 5 night June 30, 1998 to the date of the transfer under this sub- 6 section, based upon 8% effective annual interest, compounded 7 annually. 8 (b) Direct the state treasurer to transfer from the quali- 9 fied participant's account in Tier 2 to the reserve for employer 10 contributions the excess, if any, of the previously transferred 11 amount over the recomputed amount, together with interest, from 12 the date of the transfer made under subsection (1), based upon 8% 13 effective annual interest, compounded annually. 14 (3) For a vested former member who elects to terminate mem- 15 bership in this retirement system under section 701(2), the 16 retirement system shall direct the state treasurer to transfer a 17 lump sum amount from the appropriate fund created under this act 18 to the qualified participant's account in Tier 2 on or before the 19 expiration of 60 days after the date of the individual's termina- 20 tion of employment. The retirement system shall calculate the 21 amount to be transferred, which shall be equal to the sum of the 22 following: 23 (a) The vested former member's accumulated contributions, if 24 any, from the reserve for member contributions as of 12 midnight 25 on the last day of the payroll period that includes the date of 26 the election. 01332'99 * 8 1 (b) The excess, if any, of the actuarial present value of 2 the vested former member's accumulated benefit obligation, over 3 the amount specified in subdivision (a), from the reserve for 4 employer contributions. Except as provided in subsection (5), 5 for the purposes of this subsection, the present value of the 6 vested former member's accumulated benefit obligation is based 7 upon the vested former member's estimated credited service and 8 estimated final salary as of 12 midnight on the last day of the 9 payroll period that includes the date of the election. The actu- 10 arial present value shall be computed as of 12 midnight on that 11 date and shall be based on the following: 12 (i) Eight percent effective annual interest, compounded 13 annually. 14 (ii) A 50% male and 50% female gender neutral blend of the 15 mortality tables used to project retirant longevity in the most 16 recent annual actuarial valuation report. 17 (iii) A benefit commencement age, based upon the member's 18 estimated credited service as of 12 midnight on the last day of 19 the payroll period that includes the date of the election. The 20 benefit commencement age shall be the younger of the following, 21 but shall not be younger than the member's age as of 12 midnight 22 on the last day of the payroll period that includes the date of 23 the election: 24 (A) Age 60. 25 (B) Age 55, if the vested former member's estimated credited 26 service equals or exceeds 18 years. 01332'99 * 9 1 (C) The vested former member's age, if the vested former 2 member's estimated credited service equals or exceeds 25 years. 3 (c) Interest on any amounts determined in subdivisions (a) 4 and (b), from the first day of the payroll period immediately 5 following the date of the election to the date of the transfer, 6 based upon 8% effective annual interest, compounded annually. 7 (4) For each vested former member who elects to terminate 8 membership in Tier 1 under section 701(2), the retirement system 9 shall recompute the amount transferred under subsection (3) not 10 later than the expiration of 90 days after the transfer occurs 11 under subsection (3) based upon the vested former member's actual 12 credited service and actual final salary as of 12 midnight on the 13 last day of the payroll period that includes the date of the 14 election. If the recomputed amount differs from the amount 15 transferred under subsection (3) by $10.00 or more, the retire- 16 ment system shall do all of the following: 17 (a) Direct the state treasurer to transfer from the reserve 18 for employer contributions to the qualified participant's account 19 in Tier 2 the excess, if any, of the recomputed amount over the 20 previously transferred amount together with interest from 12 mid- 21 night on the last day of the payroll period that includes the 22 date of the election to the date of the transfer under this sub- 23 section, based upon 8% effective annual interest, compounded 24 annually. 25 (b) Direct the state treasurer to transfer from the quali- 26 fied participant's account in Tier 2 to the reserve for employer 27 contributions the excess, if any, of the previously transferred 01332'99 * 10 1 amount over the recomputed amount, together with interest, from 2 the date of the transfer made under subsection (3), based upon 8% 3 effective annual interest, compounded annually. 4 (5) For the purposes of subsections (1) to (4), the calcula- 5 tion of estimated and actual present value of the member's or 6 vested former member's accumulated benefit obligation shall be 7 based upon methods adopted by the department of management and 8 budget and the retirement system's actuary in consultation with 9 the retirement board. The retirement system shall utilize the 10 same actuarial valuation report used to calculate the amount 11 transferred under subsection (1) or (3) when making the recompu- 12 tation required under subsection (2) or (4). Estimated and 13 actual final salary shall be determined as provided in section 14 105(4) as of 12 midnight on the date the member or deferred 15 member ceases to be a member of Tier 1 under section 701. 16 (6) For a former nonvested member who elects to terminate 17 membership in Tier 1 under section 701(2) and who has accumulated 18 contributions standing to his or her credit in the reserve for 19 member contributions, the retirement system shall direct the 20 state treasurer to transfer a lump sum amount from the reserve 21 for member contributions created under section 210 to the quali- 22 fied participant's account in Tier 2 on or before the expiration 23 of 60 days after the date of the individual's election to termi- 24 nate membership. The retirement system shall calculate the 25 amount to be transferred, which shall be equal to the sum of the 26 following: 01332'99 * 11 1 (a) The former nonvested member's accumulated contributions, 2 if any, from the reserve for member contributions as of 12 3 midnight on the last day of the payroll period that includes the 4 date of the election. 5 (b) Interest on any amounts determined in subdivision (a), 6 from the first day of the payroll period immediately following 7 the date of the election to the date of the transfer, based upon 8 8% effective annual interest, compounded annually. 9 (7) If the department of management and budget receives 10 notification from the United States internal revenue service that 11 this section or any portion of this section will cause the 12 retirement system to be disqualified for tax purposes under the 13 internal revenue code, then the portion that will cause the dis- 14 qualification does not apply. 15 (8) AS USED IN THIS SECTION, "TEMPORARY RESTRAINING ORDER" 16 MEANS THE TEMPORARY RESTRAINING ORDER IN MICHIGAN JUDGES ASSN V 17 TREASURER OF THE STATE OF MICHIGAN, CASE NO. 98-DT-72771-CV (ED 18 MI), ENTERED AS OF 5 P.M. ON JUNE 30, 1998. 19 Sec. 705. (1) "Employer" meansthe qualified participant's20reporting unitTHIS STATE AND, IF REQUIRED FOR COMPLIANCE WITH 21 THE INTERNAL REVENUE CODE, ANY PARTICIPATING POLITICAL SUBDIVI- 22 SIONS, AGENCIES, OR INSTRUMENTALITIES OF THIS STATE, AS DETER- 23 MINED BY THE TIER 2 PLAN ADMINISTRATOR. 24 (2) "Former qualified participant" means an individual who 25 was a qualified participant and who terminates the employment 26 upon which his or her participation is based for any reason. 01332'99 * 12 1 (3) "Health benefit dependent" means the qualified or former 2 qualified participant's spouse, if any, and an unmarried child 3 who is considered a dependent of the qualified or former quali- 4 fied participant under section 152 of the internal revenue code, 5 if any. 6 Sec. 706. (1) "Qualified participant" means an individual 7 who is a participant of Tier 2 and who meets 1 of the following 8 requirements: 9 (a) An individual who first becomes a judge or state offi- 10 cial on or after March 31, 1997, and who before March 31, 1997 11 would have been eligible to be a member of Tier 1. 12 (b) An individual who elects to terminate membership in Tier 13 1 and who elects to participate in Tier 2 in the manner pre- 14 scribed in section 701. 15 (2) "Refund beneficiary" means an individual nominated by a 16 qualified participant or a former qualified participant under 17 section 717 to receive a distribution of the participant's accu- 18 mulated balance in the manner prescribed in section 718. 19 (3) "SALARY" MEANS AN AMOUNT EQUAL TO THE SALARY PAID BOTH 20 DIRECTLY AND INDIRECTLY BY THIS STATE FOR THE POSITION THAT A 21 QUALIFIED PARTICIPANT HOLDS, WHICH SALARY IS PAID PURSUANT TO THE 22 REVISED JUDICATURE ACT OF 1961, 1961 PA 236, MCL 600.101 TO 23 600.9948. 24 (4)(3)"State treasurer" means the treasurer of this 25 state. 26 Sec. 711. A qualified participant shall not participate in 27 any other public sector retirement benefits plan for simultaneous 01332'99 * 13 1 service rendered to the same public sector employer. Except as 2 otherwise provided in this act or by the state treasurer, this 3 section does notprohibitDO ANY OF THE FOLLOWING: 4 (A) PROHIBIT a qualified participant from participating in a 5 retirement plan established by this state or other public sector 6 employer under the internal revenue code. 7 (B) IMPAIR A QUALIFIED PARTICIPANT'S RIGHT TO RECEIVE HEALTH 8 CARE BENEFITS OR OTHER INSURANCE BENEFITS FROM A REPORTING UNIT. 01332'99 * Final page. KKR