HB-6639, As Passed House, December 3, 2008
November 12, 2008, Introduced by Rep. Hune and referred to the Committee on Senior Health, Security, and Retirement.
A bill to amend 1992 PA 234, entitled
"The judges retirement act of 1992,"
by amending sections 105 and 604 (MCL 38.2105 and 38.2604), as
amended by 2002 PA 95.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 105. (1) 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, an 26 USC 408.
(b) An individual retirement annuity described in section
408(b)
of the internal revenue code, an 26 USC 408.
(c) An annuity plan described in section 403(a) of the
internal
revenue code, a 26 USC
403.
(d) A qualified trust described in section 401(a) of the
internal
revenue code, an 26 USC
401.
(e) An annuity contract described in section 403(b) of the
internal
revenue code, or an 26 USC
403.
(f) An eligible plan under section 457(b) of the internal
revenue code, 26 USC 457, that 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 that separately accounts
for amounts transferred into such eligible plan under section
457(b) of the internal revenue code, 26 USC 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.
(2)
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.
(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 such portion is paid to
either
of the following:
(i) An individual retirement account or annuity
described in
section
408(a) or (b) of the internal revenue code.
(ii) A qualified defined contribution plan described in
section
401(a)
or 403(a) of the internal revenue code that agrees to
separately
account for amounts so transferred, including separately
accounting
for the portion of the distribution that is includable
in
gross income and the portion of such distribution that 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.
(3) "Executive secretary" means the executive secretary of the
retirement system as provided in section 205.
(4) Except as otherwise provided in this subsection, "final
compensation" means the annual rate of compensation for the
calendar year of retirement. For a member who retires on January 1,
final compensation means the annual rate of compensation for the
calendar year immediately preceding the date of retirement. Final
compensation does not include an amount that exceeds the maximum
salary set forth for that particular member or vested former member
in the revised judicature act, if applicable. For a member who is a
judge and who performs judicial duties for a limited period or a
specific assignment as authorized by the supreme court pursuant to
section 23 of article VI of the state constitution of 1963, final
compensation means the annual rate of compensation the member was
being paid at the termination of his or her tenure in office as an
elected judge.
(5) "Former elected official" means a member who held a state
elective office before membership in this retirement system, the
former judges retirement system, or the former probate judges
retirement system.
(6) "Former judges retirement system" means the state of
Michigan judges' retirement system created by former 1951 PA 198.
(7) "Former probate judges retirement system" means the state
of Michigan probate judges retirement system created by former 1954
PA 165.
Sec. 604. (1) This section is enacted pursuant to section
401(a) of the internal revenue code, 26 USC 401, 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)
Except as otherwise provided in this section, employer-
financed
benefits provided by the retirement system under this act
shall
not exceed the lesser of $90,000.00 or 100% of the member's
average
compensation for high 3 years as described in section
415(b)(3)
of the internal revenue code for retirement occurring at
age
62 or older.
(3)
The limitation on employer financed benefits provided by
the
retirement system under subsection (2) applies unless
application
of subsections (4) and (5) produces a higher
limitation,
in which case the higher limitation applies.
(4)
If a member retires before age 62, the amount of
$90,000.00
in subsection (2) is actuarially reduced to reflect
payment
before age 62. The retirement system shall use an interest
rate
of 5% per year compounded annually to calculate the actuarial
reduction
in this subsection. If this subsection produces a
limitation
of less than $75,000.00 at age 55, the limitation at age
55
is $75,000.00 and the limitations for ages under age 55 shall be
calculated
from a limitation of $75,000.00 at age 55.
(5)
Section 415(d) of the internal revenue code requires the
commissioner
of internal revenue to adjust the $90,000.00
limitation
in subsection (2) to reflect cost of living increases,
beginning
with calendar year 1988. This subsection shall be
administered
using the limitations applicable to each calendar year
as
adjusted by the commissioner of internal revenue under section
415(d)
of the internal revenue code. The retirement system shall
adjust
the benefits subject to the limitation each year to conform
with
the adjusted limitation.
(2) The retirement system shall be administered in compliance
with the provisions of 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, 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 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) (6)
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, vested
former members, retirants, and retirement allowance beneficiaries
before satisfaction of all retirement system liabilities.
(4) (7)
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) (8)
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 in which the required minimum distribution
requirements apply to this act.
(6) (9)
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 regulations applicable to governmental plans.
(7) (10)
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) (11)
For purposes of determining
actuarial equivalent
retirement allowances under sections 506(1)(a) and (b) and 602, the
actuarially assumed interest rate shall be 8% with utilization of
the 1983 group annuity and mortality table.
(12)
Notwithstanding any other provision of this section, the
retirement
system shall be administered in compliance with the
provisions
of section 415 of the internal revenue code and revenue
service
regulations under that section that are applicable to
governmental
plans. If there is a conflict between this section and
another
section of this or any other act of this state, this
section
prevails.
(9) (13)
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, 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.
(10) (14)
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. This subsection applies to all qualified military service on
or after December 12, 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 treated as having resumed and
then terminated employment on account of death.