HB-6640, As Passed House, December 3, 2008

 

 

 

 

 

 

 

 

 

 

 

 

HOUSE BILL No. 6640

 

November 12, 2008, Introduced by Rep. Robert Jones and referred to the Committee on Senior Health, Security, and Retirement.

 

     A bill to amend 1957 PA 261, entitled

 

"Michigan legislative retirement system act,"

 

by amending sections 8a and 59a (MCL 38.1008a and 38.1059a),

 

section 8a as amended by 2002 PA 97 and section 59a as amended by

 

2006 PA 614.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 8a. (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, or 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 agrees to separately

 

account for amounts transferred into the 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.

 

     (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 that is not includable in federal gross income 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 as 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 which is

 

includable in gross income and the portion of such distribution

 

which is not so includable.

 

     (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) "Internal revenue code" means the United States internal

 

revenue code of 1986.

 

     Sec. 59a. (1) This section is enacted pursuant to section

 

401(a) of the internal revenue code, 26 USC 401(a) 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, 26 USC 401, and

 

that the trust be an exempt organization under section 501 of the

 

internal revenue code, 26 USC 501. The board of trustees shall

 

administer the retirement system to fulfill this intent.

 

     (2) Notwithstanding any other provision of this act, 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 portions 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 of

 

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


 

survivors, 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, 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 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 vested 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(d)(3), 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 board of trustees, 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) For purposes of determining actuarial equivalent

 

retirement allowances under this act, the actuarially assumed

 

interest rate shall be 7% with utilization of the 1971 group

 

annuity and mortality table.

 

     (9) 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), 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) 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). This subsection applies to all qualified

 

military service on or after December 12, 1994. Beginning 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 will be treated as

 

having resumed and then terminated employment on account of death.