HOUSE BILL No. 6639

 

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.