Bill Text: MI SB1135 | 2015-2016 | 98th Legislature | Introduced

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Bill Title: Retirement; judges; naming a second spouse as beneficiary if first spouse predeceases him or her and naming of spouse as beneficiary if marriage occurs or is recognized after retirement allowance effective date; allow, and revise the determination of a beneficiary's actuarial equivalent retirement allowance. Amends secs. 506 & 604 of 1992 PA 234 (MCL 38.2506 & 38.2604).

Spectrum: Slight Partisan Bill (Democrat 3-1)

Status: (Introduced - Dead) 2016-10-20 - Referred To Committee On Appropriations [SB1135 Detail]

Download: Michigan-2015-SB1135-Introduced.html

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SENATE BILL No. 1135

 

 

October 20, 2016, Introduced by Senators HERTEL, HOOD, BRANDENBURG and GREGORY and referred to the Committee on Appropriations.

 

 

 

     A bill to amend 1992 PA 234, entitled

 

"The judges retirement act of 1992,"

 

by amending sections 506 and 604 (MCL 38.2506 and 38.2604), section

 

506 as amended by 2002 PA 95 and section 604 as amended by 2008 PA

 

514.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 506. (1) Upon On application for retirement under this

 

act, a member or vested former member who meets the requirements of

 

section 501 may elect to receive a retirement allowance as a

 

straight life retirement allowance or as an optional retirement

 

allowance under 1 of the payment options provided in this section.

 

The member or vested former member shall file a written election

 

with the retirement system before the effective date of the

 

retirement allowance. If a member or vested former member fails to

file a written election under this subsection, the member or vested

 

former member is considered to have elected the straight life

 

retirement allowance under section 503. The member or vested former

 

member shall designate in the written election a retirement

 

allowance beneficiary that shall must be either the spouse,

 

brother, sister, parent, or child, including an adopted child, of

 

the member or vested former member. The amount of retirement

 

allowance under options A and B are the actuarial equivalent of the

 

amount of the straight life retirement allowance calculated under

 

section 503. The options are as follows:

 

     (a) Option A. The retirement system shall will pay an optional

 

retirement allowance to the retirant for life with the provision

 

that upon on the retirant's death, payment of the optional

 

retirement allowance is continued throughout the lifetime of the

 

retirement allowance beneficiary whom the member or vested former

 

member designated in writing and filed with the retirement system

 

at the time of election of the option.

 

     (b) Option B. The retirement system shall will pay an optional

 

retirement allowance for life to the retirant with the provision

 

that upon on the retirant's death, payment of 1/2 of the optional

 

retirement allowance is continued throughout the lifetime of the

 

retirement allowance beneficiary whom the member or vested former

 

member designated in writing and filed with the retirement system

 

at the time of election of the option.

 

     (2) Except as otherwise provided in this section, a retirant

 

shall not change the election of a payment option or the

 

designation of a retirement allowance beneficiary under subsection

(1) after the retirement allowance effective date. If When a

 

retirant who elected a payment option under subsection (1)(a) or

 

(b) dies, the retirement system shall pay the optional retirement

 

allowance to the option A beneficiary or option B beneficiary

 

effective the first day of the month following after the retirant's

 

death. If the option A or option B beneficiary designated under

 

this section is the surviving spouse of the deceased retirant, the

 

surviving spouse may elect to receive a retirement allowance as

 

provided in section 508 in lieu instead of the survivor portion of

 

the optional form of payment elected by the retirant under this

 

section.

 

     (3) If the option A beneficiary or option B beneficiary

 

predeceases the retirant, the retirant's benefit reverts to a

 

straight life retirement allowance and the retirement system shall

 

begin payment of the straight life retirement allowance to the

 

retirant effective the first day of the month following after the

 

option A or option B beneficiary's death.

 

     (4) The retirement system shall provide each member or vested

 

former member who applies for retirement a written explanation of

 

the optional forms of payment under this section before the member

 

or vested former member retires.

 

     (5) If a retirant receiving an optional retirement allowance

 

under this section is divorced from the spouse who had been

 

designated the option A or option B beneficiary, the retirement

 

system shall consider the election of the optional form of payment

 

option under this section void if the judgment of divorce or award

 

or order of the court, or an amended judgment of divorce or award

or order of the court, described in the public employee retirement

 

benefit protection act, 2002 PA 100, MCL 38.1681 to 38.1689, and

 

dated after June 27, 1991 provides that the election of the

 

optional form of payment option under this section is to be

 

considered void by the retirement system and the retirant provides

 

a certified copy of the judgment of divorce or award or order of

 

the court, or an amended judgment of divorce or award or order of

 

the court, to the retirement system. If the retirement system

 

considers the election of an optional form of payment under this

 

section is considered void by the retirement system under this

 

subsection, the retirant's retirement allowance shall must revert

 

to a straight life retirement allowance, including postretirement

 

adjustments, if any, subject to an award or order of the court as

 

described in the public employee retirement benefit protection act,

 

2002 PA 100, MCL 38.1681 to 38.1689. The retirement allowance shall

 

must revert to a straight life retirement allowance under this

 

subsection effective the first of the month after the date the

 

retirement system receives a certified copy of the judgment of

 

divorce or award or order of the court. This subsection does not

 

supersede a judgment of divorce or award or order of the court in

 

effect on June 27, 1991. This subsection does not require the

 

retirement system to distribute or pay retirement assets on behalf

 

of a retirant in an amount that exceeds the actuarially determined

 

amount that would otherwise become payable if a judgment of divorce

 

had not been rendered.

 

     (6) A member who continues active employment on or after the

 

date he or she acquires 8 years of credited service or who becomes

eligible for a retirement allowance as a vested former member under

 

section 501, whichever occurs first, may file a written election

 

with the retirement system to elect option A as provided in

 

subsection (1)(a). The member or vested former member shall

 

nominate a retirement allowance beneficiary in the written election

 

in the same manner as if the member or vested former member were

 

then retiring from service. If the beneficiary's death or divorce

 

from the member or vested former member occurs before the effective

 

date of the member's or vested former member's retirement, the

 

member's or vested former member's election of option A and

 

nomination of retirement allowance beneficiary is automatically

 

revoked and the member or vested former member may again elect

 

option A and nominate a retirement allowance beneficiary at any

 

time before the effective date of retirement. If a member or vested

 

former member who has made an election and nominated a retirement

 

allowance beneficiary as provided in this subsection dies before

 

the effective date of his or her retirement, then the retirement

 

allowance beneficiary shall must receive the retirement allowance

 

that he or she the retirement allowance beneficiary would have been

 

entitled to receive under option A if the member or vested former

 

member had been retired on the date of the member's or vested

 

former member's death. Except as otherwise provided by subsection

 

(7), if a member or vested former member who has made an election

 

under this subsection subsequently retires under this act, his or

 

her election of option A takes effect at the time of retirement.

 

The member or vested former member, before the effective date of

 

retirement, but not after the effective date of retirement, may

revoke his or her previous election of option A and elect to

 

receive his or her retirement allowance as a straight life

 

retirement allowance or under option B as provided for in

 

subsection (1). This subsection does not apply on and after the

 

date the settlement agreement in the case of Michigan judges assn v

 

Treasurer of the State of Michigan, case no. 98-DT-72771-CV (Ed

 

Mi), becomes of no further force or effect, is rendered null and

 

void, or is otherwise terminated.

 

     (7) If a member, vested former member, retiring member, or

 

retiring vested former member is married on the effective date of

 

the retirement allowance, an election under this section, other

 

than an election of a payment option under subsection (1) naming

 

the spouse as retirement allowance beneficiary, shall is not be

 

effective unless the election is signed by the spouse. However,

 

this requirement may be waived by the retirement board if the

 

signature of a spouse cannot be obtained because of extenuating

 

circumstances. As used in this subsection, "spouse" means the

 

person individual to whom the member, vested former member,

 

retiring member, or retiring vested former member is married on the

 

effective date of the retirement allowance.

 

     (8) If the retirement allowance payments terminate before an

 

aggregate amount equal to the retirant's accumulated contributions

 

has been paid, the difference between the retirant's accumulated

 

contributions and the aggregate amount of retirement allowance

 

payments made must be paid to the individual designated in a

 

writing filed with the retirement board on a form provided by the

 

retirement board. If the designated individual does not survive the

retirant or retirement allowance beneficiary, the difference must

 

be paid to the deceased recipient's estate or to the legal

 

representative of the deceased recipient.

 

     (9) A retirant who selected a retirement allowance beneficiary

 

under subsection (1)(a) or (b) may change his or her retirement

 

allowance beneficiary only if 1 or more of the following

 

requirements are satisfied:

 

     (a) The retirant was married on his or her retirement

 

allowance effective date and all of the following apply:

 

     (i) The first retirement allowance beneficiary predeceases the

 

retirant after the retirement allowance effective date.

 

     (ii) The retirant marries another spouse after the retirement

 

allowance effective date.

 

     (iii) The retirant files a written request with the retirement

 

system selecting an optional retirement allowance under 1 of the

 

payment options provided in subsection (1) designating his or her

 

current spouse as a retirement allowance beneficiary not earlier

 

than 180 days and not later than 1 year after the date of marriage

 

of the retirant and the current spouse. However, a retirant whose

 

date of marriage is after the retirement allowance effective date

 

and before the effective date of the amendatory act that added this

 

subsection has 180 days after the effective date of the amendatory

 

act that added this subsection to file a written request with the

 

retirement system.

 

     (b) The retirant was married on the effective date of his or

 

her retirement, but his or her marriage was not recognized by this

 

state and all of the following apply:

     (i) The retirant continues to be married to the same spouse to

 

whom he or she was married on the effective date of retirement and

 

whose marriage is currently recognized by this state.

 

     (ii) The retirant files a written request with the retirement

 

system selecting 1 of the payment options provided in subsection

 

(1) and designating his or her current spouse as a retirement

 

allowance beneficiary not earlier than 180 days and not later than

 

1 year after the date of marriage of the retirant and the current

 

spouse. However, a retirant whose date of marriage is after the

 

retirment allowance effective date and before the effective date of

 

the amendatory act that added this subsection has 180 days after

 

the effective date of the amendatory act that added this subsection

 

to file a written request with the retirement system.

 

     (c) The retirant was not married on his or her retirement

 

allowance effective date and all of the following apply:

 

     (i) The retirant marries after the retirement allowance

 

effective date.

 

     (ii) The retirement allowance beneficiary is the retirant's

 

spouse.

 

     (iii) The retirant files a written request with the retirement

 

system to name his or her current spouse as a retirement allowance

 

beneficiary not earlier than 180 days and not later than 1 year

 

after the date of marriage of the retirant and the current spouse.

 

However, a retirant whose date of marriage is after the retirement

 

allowance effective date and before the effective date of the

 

amendatory act that added this subsection has 180 days after the

 

effective date of the amendatory act that added this subsection to

file a written request with the retirement system.

 

     (10) A retirant who was not married on his or her retirement

 

allowance effective date and who did not select a payment option

 

provided in this section may select an optional form of benefit

 

payment under subsection (1)(a) or (b) and designate a retirement

 

allowance beneficiary if all of the following apply:

 

     (a) The retirant marries after his or her retirement allowance

 

effective date.

 

     (b) The retirement allowance beneficiary is the retirant's

 

spouse.

 

     (c) The retirement allowance beneficiary is only designated as

 

the retirement allowance beneficiary for that portion of the

 

retirant's retirement allowance that is not subject to an eligible

 

domestic relations order assigning a previous spouse a reduced

 

benefit under section 4(b) of the eligible domestic relations order

 

act, 1991 PA 46, MCL 38.1704.

 

     (d) The retirant files a written request with the retirement

 

system to select the optional form of benefit payment under

 

subsection (1)(a) or (b) and to designate his or her spouse as the

 

retirement allowance beneficiary not earlier than 180 days and not

 

later than 1 year after the retirant's date of marriage. However, a

 

retirant whose date of marriage is after the retirement allowance

 

effective date and before the effective date of the amendatory act

 

that added this subsection has 180 days after the effective date of

 

the amendatory act that added this subsection to file a written

 

request with the retirement system.

 

     (11) The retirement allowance of the retirant who makes an

election under subsection (9) or (10) must not be greater than the

 

actuarial equivalent of the regular retirement allowance as

 

determined by the retirement board and must become effective the

 

first day of the month after the filing of the written request with

 

the retirement system.

 

     (12) If the retirant dies no later than 12 months after the

 

effective date of his or her election under subsection (9) or (10),

 

the retirement allowance for the surviving spouse established under

 

subsection (9)(a) or (c) or (10) must terminate 12 months after the

 

death of the retirant.

 

     (13) As used in this section, "date of marriage" means the

 

date that the retirant's marriage is recognized by this state.

 

     Sec. 604. (1) This section is enacted pursuant to under

 

section 401(a) of the internal revenue code, 26 USC 401, that which

 

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, 26 USC 401, and

 

that the trust be an exempt organization exempt from taxation under

 

section 501 of the internal revenue code, 26 USC 501. The

 

department shall administer the retirement system to fulfill this

 

the intent of this subsection.

 

     (2) The retirement system shall be administered in compliance

 

with the provisions of section 415 of the internal revenue code of

 

1986, 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 Internal Revenue Service on April 5, 2007.

 

Employer-financed benefits provided by the retirement system under

 

this act shall must 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, 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, the

 

applicable limitation shall apply applies 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 must be held in

 

trust and invested for the sole purpose of meeting the legitimate

 

obligations of the retirement system and shall must not be used for

 

any other purpose. The assets shall must not be used for or

 

diverted to a purpose other than for the exclusive benefit of the

 

members, vested former members, retirants, and retirement allowance

 

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 on retirement, pursuant to internal revenue

service under Internal Revenue Service regulations and approved

 

internal revenue service Internal Revenue Service exclusion ratio

 

tables.

 

     (5) The required beginning date for retirement allowances and

 

other distributions shall must 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 must

 

be administered in accordance with a reasonable and good faith

 

interpretation of the required minimum distribution requirements

 

for all years in which the required minimum distribution

 

requirements apply to this act.

 

     (6) If the retirement system is terminated, the interest of

 

the members, vested former members, retirants, and retirement

 

allowance 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, and related internal revenue

 

service 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.December

 

31, 1992.

 

     (8) For purposes of determining actuarial equivalent

 

retirement allowances under sections 506(1)(a) and (b) and 602, the

 

actuarially assumed interest rate shall must be 8% with utilization

 

of the 1983 group annuity and mortality table.determined by the

 

director of the department and the retirement board in consultation

 

with the actuary using the mortality tables recommended by the

 

actuary.

 

     (9) Notwithstanding any other provision of this act, the

 

compensation of a member of the retirement system shall must 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, 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, September 30, 1996.

 

     (10) 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. This subsection applies to all qualified military

 

service on or after December 12, 11, 1994. Beginning on 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 is treated as having

resumed and then terminated employment on account of death.