SB-1640, As Passed Senate, December 2, 2008
November 12, 2008, Introduced by Senators SWITALSKI and JANSEN and referred to the Committee on Appropriations.
A bill to amend 1986 PA 182, entitled
"State police retirement act of 1986,"
by amending sections 3 and 14a (MCL 38.1603 and 38.1614a), section
3 as amended by 2004 PA 83 and section 14a as amended by 2004 PA
50.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 3. (1) "Banked leave time program" means the part B
annual leave hours within the state's annual and sick leave program
approved by a ruling of the internal revenue service on September
5, 2003, in which a pay reduction or other concessions are applied
to a member in exchange for additional part B annual leave hours.
(2) "Credited service" means the sum of the prior service and
membership service credited to a member's account.
(3) "Deferred member" means a member who separates from
service with entitlement to a deferred retirement allowance as
provided in section 30, but who is not a retirant.
(4) "Department" means the department of management and
budget.
(5) "Direct rollover" means a payment by the retirement system
to the eligible retirement plan specified by the distributee.
(6) "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.
(7) "DROP participant" means an officer who participates in
the deferred retirement option plan established in section 24a.
(8) Beginning January 1, 2002, except as otherwise provided in
this
subsection, "eligible retirement plan" means an 1 or more of
the following:
(a) An individual retirement account described in section
408(a)
of the internal revenue code, 26 USC 408(a), an 408.
(b) An individual retirement annuity described in section
408(b)
of the internal revenue code, 26 USC 408(b), an 408.
(c) An annuity plan described in section 403(a) of the
internal
revenue code, 26 USC 403(a), or a 403.
(d) A qualified trust described in section 401(a) of the
internal
revenue code, 26 USC 401(a), an 401.
(e) An annuity contract described in section 403(b) of the
internal
revenue code, 26 USC 403(b), or an 403.
(f) An eligible plan under section 457(b) of the internal
revenue
code, 26 USC 457(b) 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 the eligible plan
under
section 457(b) of the internal revenue code, 26 USC 457(b)
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 on or before December
31,
2001, an eligible retirement plan means an individual
retirement
account or an individual retirement annuity described
above.
(g) Beginning January 1, 2008, a Roth individual retirement
account as described in section 408A of the internal revenue code,
26 USC 408A, subject to the rules that apply to rollovers from a
traditional individual retirement account to a Roth individual
retirement account.
(9)
Beginning January 1, 2002 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(a)(9) 401.
(d)
The portion of any distribution that is not includable in
federal
gross income, determined without regard to the exclusion
for
net unrealized appreciation with respect to employer
securities,
except to the extent that the portion of the
distribution
is paid to either 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(a)
or 408(b).
(ii) A qualified defined contribution plan as described
in
section
401(a) or 403(a) of the internal revenue code, 26 USC
401(a)
or 403(a), that agrees to separately account for amounts so
transferred,
including separately accounting for the portion of the
distribution
which is includable in gross income and the portion of
the
distribution which is not includable in gross income.
(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 either 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) "Final average compensation" means the average annual
salary for the last 2 years of service with the department of state
police for which the member was compensated as defined in
subsection (13). In the case of a nonclassified member of the
department holding the rank of colonel, final average compensation
means the same average annual salary as that computed for the
highest salaried classified member of the department, or at the
average annual salary for the last 2 years of service with the
department of state police for which the member was compensated,
whichever is greater. Average annual salary includes only the
following compensation items:
(a) Regular salary paid for the last 2 years of service,
including, but not limited to, that salary that is deferred
pursuant to a state deferred compensation program.
(b) Overtime, shift differential, and shift differential
overtime paid for the last 2 years of service.
(c) Gross pay adjustments paid affecting the last 2 years of
service, including compensatory time and emergency response
compensation.
(d) Up to a maximum of 240 hours of accumulated annual leave,
paid at the time of retirement separation excluding part B annual
leave hours paid at the time of retirement separation.
(e) Deferred hours under Plan B of the fiscal years ending
September 30, 1981, and September 30, 1982, that are paid at the
time of retirement separation.
(f) Longevity pay equal to 2 full years.
(g) Bomb squad pay paid for the last 2 years of service.
(h) Post 29 freeway premium paid for the last 2 years of
service.
(i) On-call pay paid for the last 2 years of service.
(j) Beginning October 1, 2003, the value of any unpaid
furlough hours or the value of any unpaid hours exchanged for part
B annual leave hours, calculated at the member's then-current
hourly rate or rates of pay, for a period during which a member is
participating in the banked leave time program.
(11) "Furlough hours" means unworked hours incurred in
conjunction with the banked leave time program.
(12) "Internal revenue code" means the United States internal
revenue code of 1986.
(13) "Last 2 years of service" means the 2-year period
immediately preceding the member's last day of service or that
period of 2 consecutive years of service with the department of
state police immediately preceding the date the duty disability
occurred according to the medical examinations conducted pursuant
to section 29 or, if the officer participated in the deferred
retirement option plan, the 2-year period immediately preceding
participation in the deferred retirement option plan.
Sec. 14a. (1) This section is enacted pursuant to section
401(a) of the internal revenue code that imposes certain
administrative requirements and benefit limitations for qualified
governmental plans. This state intends that the retirement system
be a qualified pension plan created in trust under section 401 of
the internal revenue code and that the trust be an exempt
organization under section 501 of the internal revenue code. The
department shall administer the retirement system to fulfill this
intent.
(2) The retirement system shall be administered in compliance
with section 415 of the internal revenue code, 26 USC 415, and
regulations under that section that are applicable to governmental
plans and, beginning January 1, 2010, applicable provisions of the
final regulations issued by the internal revenue service on April
5, 2007. Employer-financed benefits provided by the retirement
system under this act shall not exceed the applicable limitations
set forth in section 415 of the internal revenue code, 26 USC 415,
as adjusted by the commissioner of internal revenue under section
415(d)
of the internal revenue code, 26 USC 415(d) 415,
to reflect
cost of living increases, and the retirement system shall adjust
the benefits, including benefits payable to retirants and
retirement allowance beneficiaries, subject to the limitation each
calendar year to conform with the adjusted limitation. For purposes
of
section 415(b) of the internal revenue code, 26 USC 415(b) 415,
the applicable limitation shall apply to aggregated benefits
received from all qualified pension plans for which the office of
retirement services coordinates administration of that limitation.
If there is a conflict between this section and another section of
this act, this section prevails.
(3) The assets of the retirement system shall be held in trust
and invested for the sole purpose of meeting the legitimate
obligations of the retirement system and shall not be used for any
other purpose. The assets shall not be used for or diverted to a
purpose other than for the exclusive benefit of the members,
deferred members, retirants, and beneficiaries before satisfaction
of all retirement system liabilities.
(4) The retirement system shall return post-tax member
contributions made by a member and received by the retirement
system to a member upon retirement, pursuant to internal revenue
service regulations and approved internal revenue service exclusion
ratio tables.
(5) The required beginning date for retirement allowances and
other distributions shall not be later than April 1 of the calendar
year following the calendar year in which the employee attains age
70-1/2 or April 1 of the calendar year following the calendar year
in which the employee retires. The required minimum distribution
requirements imposed by section 401(a)(9) of the internal revenue
code, 26 USC 401, shall apply to this act and be administered in
accordance with a reasonable and good faith interpretation of the
required minimum distribution requirements for all years to which
the required minimum distribution requirements apply to this act.
(6) If the retirement system is terminated, the interest of
the members, deferred members, retirants, and beneficiaries in the
retirement system is nonforfeitable to the extent funded as
described in section 411(d)(3) of the internal revenue code, 26 USC
411(d)(3)
411, and related internal revenue service regulations
applicable to governmental plans.
(7) Notwithstanding any other provision of this act to the
contrary that would limit a distributee's election under this act,
a distributee may elect, at the time and in the manner prescribed
by the retirement board, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover. This subsection
applies to distributions made on or after January 1, 1993.
(8) Notwithstanding any other provision of this act, the
compensation of a member of the retirement system shall be taken
into account for any year under the retirement system only to the
extent that it does not exceed the compensation limit established
in section 401(a)(17) of the internal revenue code, 26 USC
401(a)(17)
401, as adjusted by the commissioner of internal
revenue. This subsection applies to any person who first becomes a
member of the retirement system on or after October 1, 1996.
(9) Notwithstanding any other provision of this act,
contributions, benefits, and service credit with respect to
qualified military service will be provided under the retirement
system in accordance with section 414(u) of the internal revenue
code,
26 USC 414(u) 414. This subsection applies to all qualified
military service on or after December 12, 1994. Effective January
1, 2007, in accordance with section 401(a)(37) of the internal
revenue code, 26 USC 401, if a member dies while performing
qualified military service for purposes of determining any death
benefits payable under this act, the member shall be treated as
having resumed and then terminated employment on account of death.