SB321 By Senator Hightower RFD Finance and Taxation Education Rd 1 15-MAR-17

SYNOPSIS: This bill would create an option for certain retirees of the Teachers' Retirement System and the Employees' Retirement System to elect to receive a lump-sum cash payment equal to and in lieu of a portion of his or her retirement allowance, not to exceed 50 percent.

This bill would require the Director of Finance to certify to the Board of Control, the Governor, and the presiding officer of each house of the Legislature whether or not available funds are sufficient and economic conditions are satisfactory to support the financial viability of the lump-sum retirement allowance option and would delay the offering of the option for a period of 12 months if economic conditions do not support the viability of the lump-sum option.

This bill would also create the Alabama Pension Authority and would authorize the authority to issue bonds to fund the lump-sum retirement allowance option to be repaid based on savings accrued from the decreased annual required contribution obligations of the state to the Teachers' Retirement System and the Employees' Retirement System.

This bill would also provide for the formation of the authority, the powers and duties of the authority, bond requirements, and the dissolution of the authority.

A BILL TO BE ENTITLED AN ACT

Relating to retirement; to amend Sections 16-25-14, 16-25-21, 36-27-16, and 36-27-24, Code of Alabama 1975, to allow certain retirees of the Teachers' Retirement System and the Employees' Retirement System to elect to receive a lump-sum cash payment equal to a specified portion of their retirement allowance under certain conditions; to require the Director of Finance to certify to the Board of Control, the Governor, and the presiding officer of each House of the Legislature whether there are sufficient funds and whether economic conditions support the viability of the lump-sum option; to provide for the creation of the Alabama Pension Authority; to provide for the duties and powers of the authority; to authorize the authority to issue bonds; to provide for the bond requirements; and to provide for the dissolution of the authority under certain conditions.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:Section 1. Sections 16-25-14 and 16-25-21, Code of Alabama 1975, are amended to read as follows:

§16-25-14.

"(a)(1) Any Tier I plan member who withdraws from service upon or after attainment of age 60 and any Tier II plan member who withdraws from service upon or after attainment of age 62, or in the case of a Tier II plan member who is a correctional officer, firefighter, or law enforcement officer as defined in Section 36-27-59, who withdraws from service upon or after attainment of age 56 with at least ten years of creditable service as a correctional officer, firefighter, or law enforcement officer may retire upon written application to the Board of Control setting forth at what time, not less than 30 days nor more than 90 days subsequent to the execution and filing thereof, he or she desires to be retired; provided, that any such member who became a member on or after October 1, 1963, shall have completed 10 or more years of creditable service.

"(2) Any Tier I plan member who has attained age 60 and any Tier II plan member who has attained age 62, or in the case of a Tier II plan member who is a correctional officer, firefighter, or law enforcement officer as defined in Section 36-27-59, who has attained age 56 with at least ten years of creditable service as a correctional officer, firefighter, or law enforcement officer and has previously withdrawn from service may retire upon written application to the Board of Control setting forth at what time, not less than 30 days nor more than 90 days subsequent to the execution and filing thereof, he or she desires to be retired; provided, that the member shall have completed at the time for his or her withdrawal from service the requirements established by the Board of Control for eligibility for deferred benefits pursuant to Section 16-25-3.

"(3) Any person who is presently covered or is eligible to be covered under the Employees' Retirement System of Alabama or the Teachers' Retirement System of Alabama and who, prior to such coverage or eligibility for coverage, served as head of any Alabama county's public library service department shall have credited to him or her one year of creditable service for each year served as such head, not to exceed 12 years; provided, that such person shall pay into the retirement system the employee's part of the cost or contribution based on the salary paid to such person during the time of his or her service in the above capacity, with such cost or contribution to be calculated at the percent or rate in effect on October 1, 1973.

"(4) Any Tier I plan member of the Teachers' Retirement System of Alabama, who withdraws from service after the completion of at least 25 years of creditable service, may retire upon written application to the Board of Control of the Teachers' Retirement System setting forth at what time, not less than 30 days nor more than 90 days subsequent to the execution and filing thereof, he or she desires to be retired; provided, that any such member who became a Tier I plan member on or after October 1, 1963 shall have completed 10 or more years of creditable service.

"(b) Upon retirement from service, a Tier I plan member shall receive a service retirement allowance which shall consist of:

"(1) An annuity which shall be the actuarial equivalent of his or her accumulated contributions at the time of his or her retirement;

"(2) A pension which shall be equal to the annuity allowable at the age of retirement, but not to exceed an annuity allowable at age 65 computed on the basis of contributions made prior to the attainment of age 65; and

"(3) If he or she has a prior service certificate in full force and effect, an additional pension which shall be equal to the annuity which would have been provided at age of retirement, but not to exceed an annuity allowable at age 65 by twice the contributions which he or she would have made during the period of prior service with which he or she is credited had the system been in operation and had he or she contributed thereunder. In lieu of a determination of the actual compensation of the members that was received during such prior service, the Board of Control may use for the purposes of this chapter the compensation rates which, if they had progressed with the rates of salary increase shown in the tables as prescribed in subsection (o) of Section 16-25-19, would have resulted in the same average salary of the member for the five years immediately preceding the date of establishment as the records show the member actually received.

"(c) The annual service retirement pension payable to a Tier I plan member retiring on or after October 1, 1975, shall not be less than an amount which when added to his or her annuity is equal to the greater of the following two amounts:

"(1) Two and one-eightieth percent of the member's average final compensation multiplied by the number of years of his or her creditable service; or

"(2) If he or she became a member before October 1, 1971, $72 multiplied by the number of years of his or her creditable service not in excess of 25 years.

Notwithstanding, a member who retired prior to October 1, 1971, under service retirement shall receive $120 multiplied by the number of years of his or her creditable service not in excess of 25 years.

"(d) Upon retirement from service, a Tier II plan member shall receive a service retirement allowance which shall consist of an annuity which shall be the actuarial equivalent of the member's accumulated contributions at the time of retirement and a pension which, when added to the member's annuity, shall be equal to one and sixty-five hundredths percent (1.65%) of the member's average final compensation multiplied by the number of years of creditable service. Notwithstanding the foregoing, the service retirement allowance shall not exceed eighty percent (80%) of the member's average final compensation.

"(e) Upon the application of a Tier I plan member in service or of his or her employer, any member who has had 10 or more years of creditable service may be retired by the Board of Control on a disability retirement allowance not less than 30 nor more than 90 days next following the date of filing such an application; provided, that the medical board, after a medical examination of such member, shall certify that such member is mentally or physically incapacitated for further performance of duty, that such incapacity is likely to be permanent, and that such member should be retired. Upon the application of a Tier II plan member in service or of his or her employer, any member who has had 10 or more years of creditable service may be retired by the Board of Control on a disability retirement allowance not less than 30 nor more than 90 days next following the date of filing such an application; provided, that the medical board, after a medical examination of such member, shall certify that the member is totally and permanently mentally or physically incapacitated from regular and substantial gainful employment, and that such member should be retired.

"(f) Upon retirement for disability, a Tier I plan member shall receive a service retirement allowance if he or she has attained age 60 or if any law or part of any law pertaining to retirement under the Teachers' Retirement System of Alabama provides for service retirement after the completion of 25 years of creditable service and the member has completed 25 years of creditable service; otherwise, he or she shall receive a disability retirement allowance which shall consist of:

"(1) An annuity which shall be the actuarial equivalent of his or her accumulated contributions at the time of retirement; and

"(2) A pension which shall be equal to the pension that would have been payable under subdivisions (2) and (3) of subsection (b) of this section upon service retirement at age 60 had the member continued in service to that age without change in compensation.

"The annual disability retirement pension shall not be less than an amount which when added to his or her annuity is equal to the greater of the following amounts:

"a. Two and one-eightieth percent of the member's average final compensation multiplied by the number of years of creditable service.

"b. If he or she became a member before October 1, 1971, $54 multiplied by the number of years of his or her creditable service not in excess of 25 years.

"Notwithstanding, a member who retired prior to October 1, 1971, for disability shall receive $90 multiplied by the number of years of his or her creditable service not in excess of 25 years.

"(g) Upon retirement for disability, a Tier II plan member shall receive a service retirement allowance if the member has attained age 62, or in the case of a Tier II plan member who is a correctional officer, firefighter, or law enforcement officer as defined in Section 36-27-59, if the member has attained age 56 with at least ten years of creditable service as a correctional officer, firefighter, or law enforcement officer, otherwise, the member shall receive a disability retirement allowance which shall be equal to one and sixty-five hundredths percent (1.65%) of the member's average final compensation multiplied by the number of years of creditable service.

"(h)(1) Once each year during the first five years following the retirement of a member on a disability retirement allowance and once in every three-year period thereafter, the Board of Control may and upon his or her application shall require any disability beneficiary who has not yet attained age 60 for a Tier I plan member or age 62 for a Tier II plan member to undergo a medical examination, such examination to be made at the place of residence of such beneficiary or other place mutually agreed upon by a physician of or designated by the medical board. Should any disability beneficiary who has not yet attained age 60 for a Tier I plan member or age 62 for a Tier II plan member refuse to submit to such medical examination, his or her pension may be discontinued until his or her withdrawal of such refusal, and should his refusal continue for one year, all his or her rights in and to his or her pension may be revoked by the Board of Control; provided, that these requirements relative to the medical examination shall not apply in the case of a Tier II plan member who is a correctional officer, firefighter, or law enforcement officer as defined in Section 36-27-59 retired for disability and who has attained age 56 with at least ten years of creditable service as a correctional officer, firefighter, or law enforcement officer.

"(2) Should the medical board report and certify to the Board of Control that a disability beneficiary who is a Tier I plan member is engaged in or is able to engage in a gainful occupation paying more than the difference between his or her retirement allowance and his average final compensation and should the Board of Control concur in such report, then the amount of his or her pension shall be reduced to an amount which, together with his or her annuity and the amount earnable by him or her, shall equal the amount of his or her average final compensation. Should his or her earning capacity be later changed, the amount of his or her pension may be further modified; provided, that the new pension shall not exceed the amount of the pension originally granted nor an amount which, when added to the amount earnable by the beneficiary together with his or her annuity, equals the amount of his or her average final compensation.

"(3) Should the medical board report and certify to the Board of Control that a disability beneficiary who is a Tier II plan member has the capacity to engage in regular and substantial gainful employment, the Board of Control shall discontinue the beneficiary's retirement allowance until the beneficiary is otherwise eligible for service retirement.

"(i)(1) Should a member cease to be a teacher, except by death or by retirement under the provisions of this chapter, the contributions standing to the credit of his or her individual account in the Annuity Savings Fund shall be paid to him or her upon demand, and in addition to such payment there shall be paid five-tenths of the interest accumulations standing to the credit of his or her individual account if he or she shall have not less than three but less than 16 years of membership service, six-tenths of such interest accumulations if he or she shall have not less than 16 but less than 21 years of membership service, seven-tenths of such interest accumulations if he or she shall have not less than 21 but less than 26 years of membership service, and eight-tenths of such interest accumulations if he or she shall have not less than 26 years of membership service.

"(2) In case of the death of a member eligible for service retirement pursuant to subsection (a) of this section, an allowance shall be paid to the surviving spouse, or to such other person who the member shall have designated, in an amount that would have been payable if the member had retired immediately prior to his or her death and had elected Option 3, as set forth in subsection (j) of this section or, alternatively, if the surviving spouse or other designee desires, he or she may choose to receive, in lieu of the allowance provided under Option 3, the accumulated contributions of the member plus an amount equal to the accumulated contributions of the member not to exceed $5,000 or the accumulated contributions of the member plus the benefit provided by Section 36-27B-3 if a benefit is payable under such section.

"(3) Upon the death of a member on account of whom no survivor allowance is payable under subdivision (2) of this subsection, the accumulated contributions of the member plus an amount equal to the accumulated contributions not to exceed $5,000 or the accumulated contributions of the member plus the benefit provided by Section 36-27B-3 if a benefit is payable under such section shall be paid to his or her estate or to such person as he shall have nominated by written designation duly executed and filed with the Board of Control.

"(j) With the provision the election of an option shall be effective on the effective date of retirement, any member may elect prior to retirement to receive, in lieu of his or her retirement allowance payable throughout life, the actuarial equivalent at that time of his or her retirement allowance in a reduced retirement allowance payable throughout life with the provision that:

"(1) OPTION 1. If he or she dies before he or she has received in annuity payments the present value of his or her annuity as it was at the time of his or her retirement, the balance shall be paid to his or her legal representatives or to such person as he or she shall nominate by written designation duly acknowledged and filed with the Board of Control;

"(2) OPTION 2. Upon his or her death, his or her reduced retirement allowance shall be continued throughout the life of and paid to such person as he or she shall nominate by written designation duly acknowledged and filed with the Board of Control at the time of his or her retirement;

"(3) OPTION 3. Upon his or her death, one half of his or her reduced retirement allowance shall be continued throughout the life of and paid to such person as he or she shall nominate by written designation duly acknowledged and filed with the Board of Control at the time of his or her retirement; or

"(4) OPTION 4. Some other benefit or benefits shall be paid either to the member or to such person or persons as he or she shall nominate; provided, that such other benefit or benefits, together with the reduced retirement allowance, shall be certified by the actuary to be of equivalent actuarial value to his or her retirement allowance and shall be approved by the Board of Control.; or

"(5) OPTION 5. Upon retirement, the member may elect to receive a lump-sum cash payment equal to and in lieu of a portion of his or her retirement allowance, not to exceed 50 percent, provided that such benefit, together with the reduced retirement allowance, shall be equal to the present value equivalent of the actuarial value of his or her retirement allowance and provided that such benefit shall be certified by the actuary and approved by the Board of Control.

"(k) The Retirement Systems of Alabama shall make available and provide financial counseling to any member that elects Option 5 as provided in subsection (j).

"(l) Prior to the close of each fiscal year, the Director of Finance shall certify to the Board of Control, the Governor, and the presiding officer of each house of the Legislature whether or not available funds are sufficient and economic conditions are satisfactory to support the financial viability of the retirement allowance provided in Option 5 in subdivision (5) of subsection (j). In the event that conditions are not satisfactory, Option 5, provided in subdivision (5) of subsection (j), shall be suspended for 12 months from the certification.

"(m) It is expressly provided that any benefits under this section shall be in addition to any other benefits provided by law for any employees of the state, and this section is specifically made supplemental to and shall be construed in pari materia with the employees' retirement law of the state.

"(k) (n) Should any beneficiary be restored to active service, his or her retirement allowance shall be suspended until he or she again withdraws from service and, he or she shall not again become a member, nor shall he or she make contributions; except, that should such beneficiary who has been restored to active service continue in service for a period of two or more years from the date of his or her reentry into active service, he or she may request the Board of Control to allow him or her to again become a member of the retirement system. The Board of Control may grant the request for restoration to membership; provided, that such beneficiary whose retirement allowance has been suspended shall repay to the system all moneys received by him or her as benefits during any period subsequent to the date of his or her reentry into active service; provided further, that he or she shall make a contribution equal to the amount he or she would have contributed had he or she been a member during the period of his or her restoration to active service on a suspended allowance basis, together with the interest which would have been credited to the contributions on account of such period of restoration up to the date such contribution is made.

"(l)(o)(1) All retirement allowance payments due on or after October 1, 1975, to members who retired prior to October 1, 1975, shall be redetermined as if the provisions of subsections (b) and (e) of this section which became effective on said date were in effect at the time the member retired; provided, that the annual retirement allowance of any member who retired on or before January 1, 1956, shall be not less than $132 multiplied by the number of years of his or her creditable service not in excess of 30 years in the case of service retirement or $99 multiplied by the number of years of creditable service not in excess of 30 years in the case of disability retirements. Any increase provided in the retirement allowance payment under this subsection for a member who retired under the provisions of any optional benefit elected pursuant to subsection (j) of this section shall accrue only to the retired member, and no person designated to receive any payments after the death of a retired member under the provisions of any such optional benefit shall receive any increase in such payments under this subsection.

"(2) Any person who served at least 30 years as a teacher in the public schools of Alabama and was never a member of the system and who, prior to October 1, 1963, was in receipt of a benefit for old age assistance pursuant to subsections (1) and (2) of Section 1 of 116, approved August 24, 1959, shall be entitled to receive an annual retirement allowance of $3,960 from the system, effective as of October 1, 1973.

"(3) Prior to October 31, 1975 any beneficiary may elect to leave on deposit with the system all or a specified part of any increase in his or her monthly retirement allowance payments arising in accordance with subdivision (1) or (2) of this subsection. The portion of each monthly payment left in the system in accordance with such election shall be credited, together with regular interest thereon, to the individual account of such beneficiary. Upon the death of such beneficiary, the total amount standing to his or her credit, including regular interest to the date of death, shall be paid in a lump sum to his or her legal representative or to such person as he or she shall have nominated by written designation duly acknowledged and filed with the Board of Control.

(m)(p) Notwithstanding any other provisions of this section to the contrary, when a designated beneficiary for a member predeceases the member who is receiving a monthly benefit allowance provided under Option 2, 3, or 4, or 5, the member may designate a replacement beneficiary for the deceased beneficiary to become effective two years after the date of designation of the replacement beneficiary and an actuarial adjustment in the monthly benefit allowance of the member to cover any cost associated with designating a replacement beneficiary shall be reflected thereafter in the monthly benefit allowance received by the member, commencing with the first benefit allowance check received by the member following the date of designation of the replacement beneficiary.

"(n)(q) Notwithstanding any provision of this section to the contrary, if a retired member who is receiving a monthly benefit allowance provided under Option 2, 3, or 4, or 5 divorces his or her designated beneficiary, the member may designate a replacement beneficiary for the beneficiary to become effective two years after the date of designation of the replacement beneficiary and an actuarial adjustment in the monthly benefit allowance of the member to cover any cost associated with designating a replacement beneficiary shall be reflected thereafter in the monthly benefit allowance received by the member, commencing with the first benefit allowance check received by the member following the date of designation of the replacement beneficiary.

"(o)(r) Any future act to increase the retirement age for Tier II plan members above the age of 62 shall require a two-thirds vote of the elected membership of each house of the Legislature.

§16-25-21.

"Effective October 1, 1997, all the assets of the retirement system shall be credited according to the purpose for which they are held among three funds, namely: The Annuity Savings Fund, the Pension Accumulation Fund, and the Expense Fund. The operation of the former Pension Reserve Fund and the Annuity Reserve Fund shall be discontinued as of such date, the balance of the former Pension Reserve Fund shall be transferred to the Pension Accumulation Fund, and the balance of the former Annuity Reserve Fund shall be transferred to the Pension Accumulation Fund.

"(1) The Annuity Savings Fund shall be a fund in which shall be accumulated contributions from the compensation of members to provide for their annuities. Contributions to and payments from the Annuity Savings Fund shall be made as follows:

"a. Each employer shall cause to be deducted from the salary of each member on each and every payroll of such employer for each and every payroll period five percent of his or her earnable compensation. For all pay dates beginning on or after October 1, 2011, each employer shall cause to be deducted from the salary of each member on each and every payroll of such employer for each and every payroll period seven and one-quarter percent (7.25%) of his or her earnable compensation. For all pay dates beginning on or after October 1, 2012, each employer shall cause to be deducted from the salary of each Tier I plan member on each and every payroll of such employer for each and every payroll period seven and one-half percent (7.5%) of his or her earnable compensation. For all pay dates beginning on or after January 1, 2013, each employer shall cause to be deducted from the salary of each Tier II plan member on each and every payroll period six percent (6%) of his or her earnable compensation; except in the case of a Tier II plan member who is a correctional officer, firefighter, or law enforcement officer as defined in Section 36-27-59, the rate of seven percent (7%) shall apply. In determining the amount earnable by a member in a payroll period, the Board of Control may consider the rate of annual compensation payable to such member on the first day of the payroll period as continuing throughout such payroll period, and it may omit deductions from compensation for any period less than a full payroll period if a teacher was not a member on the first day of the payroll period, and to facilitate the making of deductions it may modify the deduction required of any member by such an amount as shall not exceed one tenth of one percent of the annual compensation upon the basis of which such deduction is to be made.

"b. The deductions provided for herein shall be made notwithstanding that the minimum compensation provided for by law for any member shall be reduced thereby. Every member shall be deemed to consent and agree to the deduction made and provided for herein and shall receipt for his or her full salary or compensation, and payment of salary or compensation less such deduction shall be a full and complete discharge and acquittance of all claims and demands whatsoever for the service rendered by such person during the period covered by such payment, except as to the benefits provided under this chapter. The employer shall certify to the Board of Control on each and every payroll or in such other manner as the board may prescribe the amount to be deducted; and each of the amounts shall be deducted, and when deducted shall be paid into the Annuity Savings Fund and shall be credited, together with regular interest thereon, to the individual account of the member from whose compensation the deduction was made.

"c. In addition to the contributions deducted from compensation as hereinbefore provided, subject to the approval of the Board of Control, any member may deposit in the Annuity Savings Fund by a single payment or by an increased rate of contribution an amount computed to be sufficient to purchase an additional annuity which, together with his or her prospective retirement allowance, will provide for him or her a total retirement allowance not to exceed one half of his or her average final compensation at age 60. Such additional amounts so deposited shall become a part of his or her accumulated contributions except in the case of retirement, when they shall be treated as excess contributions returnable to the member in cash or as an annuity of equivalent actuarial value and shall not be considered in computing his or her pension. The contributions and interest credits of a member withdrawn by him or her, or paid to his or her estate or to his or her designated beneficiary in event of his or her death, shall be paid from the Annuity Savings Fund. Should a member cease to be a member other than by retirement under the provisions of this title, an amount equivalent to the difference, if any, between his or her accumulated contributions and the amount then paid shall be transferred to the Expense Fund. Upon the retirement of a member or the death of an eligible member where an allowance to the surviving spouse is payable, his or her accumulated contributions shall be transferred from the Annuity Savings Fund to the Pension Accumulation Fund.

"d. Notwithstanding the preceding provisions, no deductions shall be made from any member's salary on account of which the employer's contribution is in default.

"(2) The Pension Accumulation Fund shall be the fund in which shall be accumulated all reserves, other than amounts held in the Annuity Savings Fund for the payment of all pensions and other benefits. Contributions to and payments from the Pension Accumulation Fund shall be made as follows:

"a. On account of each member there shall be paid monthly by the employer an amount equal to a certain percentage of the earnable compensation of each member to be known as the "normal contribution," and an additional amount equal to a percentage of his or her earnable compensation to be known as the "accrued liability contribution," and these two amounts shall be paid monthly into the Pension Accumulation Fund. Notwithstanding any other provision of law to the contrary, additionally, an amount equal to a certain percentage of earnable compensation as determined by the Director of Finance and certified to the Board of Control to support the debt service payment of the retirement allowance provided in Option 5 in subdivision (5) of subsection (j) of Section 16-25-14, to be known as the "lump-sum option contribution" shall be paid monthly to a designated fund within the State Treasury. An amount equal to the lump-sum option contribution shall be transferred from the designated fund to the Alabama Pension Authority to pay for the corresponding debt service related to those retirement benefits. The Teachers' Retirement System shall recommend to the Legislature on or before the first legislative day of each regular session of the Legislature the rate for the following fiscal year. The Legislature shall set the rate in the annual appropriation bill.

"b. On the basis of regular interest and of such mortality and other tables as shall be adopted by the Board of Control, the actuary engaged by the board to make such valuation required by this title shall, immediately after making such valuation, determine the uniform and constant percentage of the earnable compensation of the average new entrant which, if contributed on the basis of his or her compensation throughout his or her entire period of active service, would be sufficient to provide for the payment of any pension payable on his or her account. The rate per centum so determined shall be known as the "normal contribution" rate. The normal contribution rate shall be determined by the actuary after each valuation.

"c.1. The accrued liability contribution rate shall be computed by the actuary on the basis of each valuation as the per centum rate of the total annual compensation of all members which is sufficient to liquidate the unfunded accrued liability over a period to be determined by the Board of Control which shall be not less than 10 nor more than 30 years.

"2. The unfunded accrued liability shall be computed by the actuary as the total liabilities of the system which are not dischargeable by the assets of the Annuity Savings Fund and the Pension Accumulation Fund and the present value of the aforesaid normal contributions. For purposes of computing the unfunded accrued liability the assets shall be determined as follows:

"On June 30, 1997, the assets shall be determined by using the market value of such assets. For subsequent years the value of the assets shall be determined by the system's actuary using a five year smoothed market value.

"d. The total amount payable in each year to the Pension Accumulation Fund shall be not less than the sum of the per centum rates known as the normal contribution rate and the accrued liability contribution rate of the total compensation earnable by all members during the year.

"e. All interest and dividends earned on the funds of the retirement system shall be credited to the Pension Accumulation Fund. The amounts needed to allow regular interest on the reserves in the Annuity Savings Fund shall be transferred in accordance with the provisions of this chapter from the Pension Accumulation Fund. The Board of Control, in its discretion, may transfer to and from the Pension Accumulation Fund the amount of any surplus or deficit which may develop in the Annuity Savings Fund or the Expense Fund.

"f. Upon the death of a member on account of whom no survivor allowance is payable under subdivision (2) of subsection (i) of Section 16-25-14, the death benefit as provided in subdivision 2 of subsection (i) of such section equal to the accumulated contributions not to exceed $5,000 shall be payable from the Pension Accumulation Fund.

"(3) The Expense Fund shall be the fund from which the expenses of the administration of the retirement system shall be paid, exclusive of amounts payable as retirement allowances and as other benefits provided herein. Any amounts credited to the accounts of members withdrawing before retirement and not returnable under the provisions of subsection (i) of Section 16-25-14 shall be credited to the Expense Fund. Any additional contributions required to meet the expenses of the retirement system shall be made as provided in paragraphs c., d., and e. of subdivision (4) of this section.

"(4)a. On or before October 1 of each year, each local board of education, the State Board of Education, the governing boards of the University of Alabama, Auburn University, and the University of Montevallo and the Executive Committee of the Alabama Education Association shall file with the Board of Control of the retirement system a certified statement containing the following information concerning the members of the retirement system employed by such boards for the scholastic year beginning on July first preceding the date: Name, address, monthly salary, annual salary, and such other information as the Board of Control may require. On or before July 31 of each year, each local board of education; the State Board of Education; the governing boards of the University of Alabama, Auburn University, and the University of Montevallo and the Executive Committee of the Alabama Education Association shall file with the Board of Control of the retirement system a certified statement containing the following information concerning members of the retirement system employed by such boards during the scholastic year ending on June 30 preceding the date: Name, address, monthly salary actually paid, total annual salary actually paid, and such other information as the Board of Control may require.

"b. The collection of members' contributions shall be as follows: Each local board of education, the State Board of Education, the governing boards of the University of Alabama, Auburn University, and the University of Montevallo and the Executive Committee of the Alabama Education Association shall cause to be deducted on each and every payroll period subsequent to the date of the establishment of the retirement system the contributions payable by each member as provided in this chapter. Each employer shall transmit monthly, or at such time as the Board of Control shall designate, the total amount so deducted to the Secretary-Treasurer of the Board of Control accompanied by an itemized statement of the contributions of each individual member of the retirement system. The Secretary-Treasurer of the Board of Control after making a record of all such receipts shall transmit the same to the State Treasurer to be held for use according to the provisions of this chapter. Notwithstanding anything in this section, the Board of Control may modify the form of reports required of employers and may modify the method of collecting the contributions of members so that employers may retain the amounts so deducted and have a corresponding amount deducted from funds otherwise payable to them.

"c. The employer's contributions shall be made from the same funds used to pay salaries based on the employer cost rate determined under paragraph a. of subdivision (2).

"d. Where member contributions are made from salaries paid from federal funds, the employer shall pay from federal funds to the Teachers' Retirement System the amount calculated as a percentage of the salaries of those teachers to be contributed by the employer in accordance with subdivisions (2) and (3) of this section. Such amounts shall be paid at the same time as the member contributions are made to the retirement system. The provisions of this paragraph shall not apply to funds received under the provisions of the Hatch Act of 1887, as amended in 1955, and the McIntyre-Stennis Act (Cooperative Forestry Research Act of 1962) of the Congress of the United States, for the support of agriculturally related research.

"e. Where member contributions are made from salaries paid by the Alabama Education Association, the Alabama Education Association shall pay the employer costs calculated as a percentage of the salaries of those employees to be contributed as employer in accordance with subdivisions (2) and (3) of this section. Such amounts shall be paid monthly and at the same time as the member contributions are made to the Teachers' Retirement System.

"f. To the extent that employer cost is collected for any increase in benefits payable to retired employees of local boards of education and state institutions of higher education who are retired under the Employees' Retirement System, there shall be a transfer of funds from these funds to the Employees' Retirement System for each year such benefits are payable.

"g. Employer cost provided for in this article together with member contributions required under this article shall be paid to the Teachers' Retirement System on the first day of the month following the month in which the related member salary is earned. Delinquent accounts shall accrue interest at the actuarial assumed investment rate beginning 30 days after the original due date. The member contributions for each member shall be reported to the Teachers' Retirement System in a format prescribed by the Teachers' Retirement System."

Section 2. (a) Notwithstanding any other provision of law to the contrary, within 12 months of the effective date of this act or within 12 months of separation from state service, a Tier I or Tier II plan member under the Teachers' Retirement System who has 10 or more years of creditable service, who is no longer in service of this state, and who has not attained the age and years of service requirements to be eligible for retirement, may elect to receive a lump-sum cash payment equal to the present value equivalent of the actuarial value of his or her retirement allowance in lieu of his or her retirement allowance; provided that such benefit shall be certified by the actuary and shall be approved by the Board of Control.

(b) Prior to the close of each fiscal year, the Director of Finance shall certify to the Board of Control, the Governor, and the presiding officer of each house of the Legislature whether or not available funds are sufficient and economic conditions are satisfactory to support the financial viability of the lump-sum retirement allowance option provided under subsection (a). In the event that conditions are not satisfactory, the lump-sum retirement allowance option provided under subsection (a) shall be suspended for 12 months from date of certification.

Section 3. A retiree who has elected to take a lump-sum retirement allowance option as provided under Section 16-25-14, Code of Alabama 1975, or Section 2, may not elect to purchase prior service credit for which a lump-sum allowance was distributed, but may purchase service credit for any new retirement benefits earned after the distribution of the lump-sum allowance.Section 4. Sections 36-27-16 and 36-27-24, Code of Alabama 1975, are amended to read as follows:

§36-27-16.

"(a)(1) RETIREMENT, ETC., OF EMPLOYEES GENERALLY; ELIGIBILITY FOR SERVICE RETIREMENT BENEFITS.

"a. Any Tier I plan member who withdraws from service upon or after attainment of age 60 and any Tier II plan member who withdraws from service upon or after attainment of age 62 may retire upon written application to the Board of Control setting forth at what time, not less than 30 days nor more than 90 days subsequent to the execution and filing thereof, he or she desires to be retired; provided, that any such member who became a member on or after October 1, 1963, shall have completed 10 or more years of creditable service; provided further, that a Tier I plan member employed as a state policeman shall be eligible to file application for service retirement upon attaining age 52 and a Tier II plan member employed as a state policeman or employed as a correctional officer, firefighter, or law enforcement officer as defined in Section 36-27-59 with at least ten years of creditable service as a correctional officer, firefighter, or law enforcement officer shall be eligible to file application for service retirement upon attaining age 56.

"b. Any Tier I plan member who has attained age 60, or age 52 in the case of a state policeman and any Tier II plan member who has attained age 62, or age 56 in the case of a state policeman or in the case of a correctional officer, firefighter, or law enforcement officer as defined in Section 36-27-59 who has at least ten years of creditable service as a correctional officer, firefighter, or law enforcement officer, and has previously withdrawn from service may retire upon written application to the Board of Control setting forth at what time, not less than 30 days nor more than 90 days subsequent to the execution and filing thereof, he or she desires to be retired; provided, the member shall have at the time of his or her withdrawal from service completed the age and service requirements established by the Board of Control for eligibility for deferred benefits; provided, that such minimum number of years of creditable service shall not be less than 10 years nor more than 25 years.

"c. In addition to any law or part of law relating to service retirement under the Employees' Retirement System of Alabama, any Tier I plan member of the Employees' Retirement System who withdraws from service after completion of not less than 25 years of creditable service may retire without a reduction in retirement allowance upon written application to the Board of Control of the Employees' Retirement System setting forth the first day of which month, not less than 30 days or more than 90 days subsequent to the execution and filing thereof, he or she desires to be retired, provided that no person whose employer participates in the Employees' Retirement System under Section 36-27-6 shall be entitled to the benefits provided in this paragraph unless such employer elects to come under the provisions of the paragraph. Any employer making such election must bear the cost of such benefit.

"(2) AMOUNT OF SERVICE RETIREMENT ALLOWANCE.

"a. Upon retirement from service a Tier I plan member shall receive a service retirement allowance which shall consist of:

"1. An annuity which shall be the actuarial equivalent of his or her accumulated contributions at the time of his or her retirement; except, that in the case of a state policeman who has completed 20 years of creditable service as a state policeman who retires after age 56 but prior to age 60, the annuity shall be equal to the annuity that would have been payable upon service retirement at age 60 had the member continued in service to age 60 without change in compensation;

"2. A pension which shall be equal to the annuity allowance at age of retirement, but not to exceed an annuity allowable at age 65, computed on the basis of contributions made prior to attainment of age 65; except, that in the case of a state policeman who has completed 20 years of creditable service as a state policeman who retires after age 56 but prior to age 60, the pension shall be equal to the annuity that he or she would have received had he or she contributed to age 60 without change in compensation; and

"3. An additional pension, if he or she has a prior service certificate in full force and effect, which shall be equal to the annuity which would have been provided at the age of retirement, but which shall not exceed an annuity allowable at age 65 by twice the contributions which he or she would have made during the period of prior service with which he or she is credited had the system been in operation and had he or she contributed thereunder; except, that in case of a state policeman who has completed 20 years of creditable service as a state policeman who retired after age 56 but prior to age 60, an additional pension, if he or she has a prior service certificate in full force and effect, which shall be equal to the annuity which would have been provided at age 60, but which shall not exceed an annuity allowable at age 60 by twice the contributions which he or she would have made during the period of prior service with which he or she is credited had the system been in operation and had he or she contributed thereunder.

"b. Notwithstanding the provisions of subparagraphs 1, 2, and 3 of paragraph a. of this subdivision, a state policeman who is a Tier I plan member and who has completed 20 years of service as a state policeman who retires after age 52 but prior to age 56 shall receive:

"1. An annuity which shall be equal to the annuity that would have been payable had the member continued in service for four years without change in compensation;

"2. A pension which shall be equal to the annuity that he or she would have received had he or she contributed for four years without change in compensation; and

"3. An additional pension, if he or she has a prior service certificate in full force and effect, which shall be equal to the annuity which would have been provided at the age of retirement, but which shall not exceed an annuity allowable at the age of retirement plus four years by twice the contributions which he or she would have made during the period of prior service with which he or she is credited had the system been in operation and had he or she contributed thereunder. In lieu of a determination of the actual compensation of a member that was received during such prior service, the Board of Control may use for the purpose of this article the compensation rate which, if it had progressed with the rates of salary increase shown in the tables as prescribed in subsection (n) of Section 36-27-23, would have resulted in the same average salary of the member for the five years immediately preceding the date of establishment as the records show the member actually received.

"c. The annual service retirement pension payable to a Tier I plan member not employed as a state policeman retiring on or after October 1, 1975, shall not be less than an amount which, when added to his or her annuity, is equal to the greater of the following two amounts:

"1. Two and one-eightieth percent of the member's average final compensation multiplied by the number of years of his or her creditable service; or

"2. If he or she became a member before October 1, 1965, $72.00 multiplied by the number of years of his or her creditable service not in excess of 25 years.

"d. The annual service retirement pension payable to a Tier I plan member employed as a state policeman retiring on or after October 1, 1975, shall not be less than an amount which, when added to his or her annuity is equal to the greater of the following two amounts:

"1. Two and seven-eighths percent of the member's average final compensation multiplied by the number of years of his or her creditable service. Creditable service for any state policeman under the age of 56 years who has completed 20 years of creditable service as a state policeman shall include a bonus equal to four additional years. Creditable service for a state policeman 56 years or older shall include a bonus equal to the years or portion thereof remaining until the member reaches age 60; or

"2. If he or she became a member before October 1, 1965, $86.40 multiplied by the number of years of his or her creditable service not in excess of 25 years; provided, however, that if such member has completed 20 years of creditable service as a state policeman and has not attained age 60 at the time of retirement, the pension shall be determined as provided in this subparagraph on the basis of the number of years of creditable service which he or she would have had if he or she had remained in service for four years, except that, in the case of those state policemen retiring at age 56 or after, the number of years in determining the pension shall not exceed the number of years of creditable service which he or she would have had if he or she had remained in service to age 60.

"e. Upon retirement from service, a Tier II plan member who is not employed as a state policeman shall receive a service retirement allowance which shall consist of an annuity which shall be the actuarial equivalent of the member's accumulated contributions at the time of retirement and a pension which, when added to the member's annuity, shall be equal to one and sixty-five hundredths percent (1.65%) of the member's average final compensation multiplied by the number of years of creditable service. Notwithstanding the foregoing, the service retirement allowance shall not exceed eighty percent (80%) of the member's average final compensation.

"f. Upon retirement from service, a Tier II plan member who is employed as a state policeman shall receive a service retirement allowance which shall consist of an annuity which shall be the actuarial equivalent of the member's accumulated contributions at the time of retirement and a pension which, when added to the member's annuity, shall be equal to two and three-eighths percent (2.375%) of the member's average final compensation multiplied by the member's number of years of creditable service. Notwithstanding the foregoing, the service retirement allowance shall not exceed eighty percent (80%) of the member's average final compensation.

"g. Anything in this article to the contrary notwithstanding, in the application of the foregoing provisions of this subdivision to a member whose creditable service includes a period of service as a state policeman and a period of service in another employment classification, the benefit rates applicable to a member employed as a state policeman shall apply to all creditable service as a state policeman, and the benefit rates applicable to a member not employed as a state policeman shall apply to all creditable service, but in all other respects the pension under this subdivision shall be determined on the basis of the member's employment classification at the time of his or her withdrawal from service.

"h. The annual service retirement pension payable to any state employee who had attained age 60 on or before October 1, 1945, who declined membership in the Employees' Retirement System of Alabama in the manner prescribed in Section 36-27-4 and who retires as a state employee after completing a minimum of 15 years' service shall be $72.00 multiplied by the number of years of his or her service not in excess of 25 years.

"(b)(1) RETIREMENT OF DISABLED EMPLOYEES; ELIGIBILITY FOR DISABILITY RETIREMENT BENEFITS.

"a. Upon application of a Tier I plan member in service or of his or her employer, any member who has had 10 or more years of creditable service who becomes disabled may be retired on a disability retirement allowance by the Board of Control not less than 30 nor more than 90 days next following the date of filing of such application; provided, that the medical board, after a medical examination of such member, shall certify that such member is mentally or physically incapacitated for the further performance of duty, that such incapacity is likely to be permanent and that such member should be retired. Upon the application of a Tier II plan member in service or his or her employer, any member who has had 10 or more years of creditable service may be retired by the Board of Control on a disability retirement allowance not less than 30 nor more than 90 days next following the date of filing such application; provided, that the medical board, after a medical examination of such member, shall certify that the member is totally and permanently mentally or physically incapacitated from regular and substantial gainful employment, and that such member should be retired.

"b. Without regard to the number of years of creditable service, a member employed as a state policeman, a municipal police officer or a deputy sheriff, or a member employed as a state, municipal, or county firefighter who is not covered through his or her current employer under the United States Social Security Act, who as a result of his or her employment, in the line of duty and not as a result of his or her own misconduct, shall become permanently and totally disabled to the extent that he or she cannot perform his or her duties or duties of a less strenuous nature, as an employee of the State of Alabama or as an employee of an employer participating under the provisions of Section 36-27-6, shall be retired on a disability retirement allowance, not less than 30 nor more than 90 days next following the date of filing of such application, provided that the medical board, after a medical examination of such member shall certify that such member is mentally or physically incapacitated for the further performance of duty, that such incapacity is likely to be permanent, and that such member should be retired.

"(2) AMOUNT OF DISABILITY RETIREMENT ALLOWANCE.

"a. Upon retirement for disability a member shall receive a service retirement allowance if he or she is a Tier I plan member and he or she has attained age 60 or if he or she is a Tier II plan member and he or she has attained age 62, or if any law or part of any law pertaining to retirement under the Employees' Retirement System of Alabama provides for service retirement after the completion of 25 years of creditable service without a reduction in the retirement allowance and the member has completed 25 years of creditable service, or, in the case of a state policeman, if he or she is a Tier I plan member and he or she has attained age 52 or, in the case of a state policeman or a correctional officer, firefighter, or law enforcement officer as defined in Section 36-27-59 with at least ten years of creditable service as a correctional officer, firefighter, or law enforcement officer, if he or she is a Tier II plan member and he or she has attained age 56; otherwise, he or she shall receive a disability retirement allowance which shall consist of:

"1. An annuity which shall be the actuarial equivalent of his or her accumulated contributions at the time of his or her retirement;

"2. A pension which shall be equal to the pension that would have been payable under subparagraphs 2 and 3 of paragraph a. of subdivision (2) of subsection (a) of this section upon service retirement at age 65 had the member continued in service to that age without change in compensation.

"b. The annual disability retirement pension payable to a Tier I plan member not employed as a state policeman retiring on or after October 1, 1975, shall not be less than an amount which when added to his or her annuity is equal to the greatest of the following two amounts:

"1. Two and one-eightieth percent of the member's average final compensation multiplied by the number of years of creditable service.

"2. If he or she became a member before October 1, 1965, $54.00 multiplied by the number of years of his or her creditable service not in excess of 25 years.

"c. The annual disability retirement pension payable to a Tier I plan member employed as a state policeman retiring on or after October 1, 1975, shall not be less than an amount which when added to his or her annuity is equal to the greater of the following two amounts:

"1. Two and seven-eighths percent of the member's average final compensation multiplied by the number of years of his or her creditable service. Creditable service for any state policeman under the age of 56 years who has completed 20 years of creditable service as a state policeman shall include a bonus equal to four additional years. Creditable service for a state policeman 56 years or older shall include a bonus equal to the years or portion thereof remaining until the member reaches age 60; or

"2. If he or she became a member before October 1, 1965, $64.80 multiplied by the number of years of his or her creditable service not in excess of 25 years.

"d. The annual disability retirement allowance payable to a Tier II plan member not employed as a state policeman shall be equal to one and sixty-five hundredths percent (1.65%) of the member's average final compensation multiplied by the number of years of creditable service.

"e. The annual disability retirement allowance payable to a Tier II plan member employed as a state policeman shall be equal to two and three-eighths percent (2.375%) of the member's average final compensation multiplied by the number of years of creditable service.

"f. Anything in this chapter to the contrary notwithstanding in the application of the provisions of this subdivision to a member whose creditable service includes a period of service as a state policeman and a period of service in another employment classification the benefit rates applicable to a member employed as a state policeman shall apply to all creditable service as a state policeman, and the benefit rates applicable to a member not employed as a state policeman shall apply to all other creditable service, but in all other respects the pension under this subdivision shall be determined on the basis of the member's employment classification at the time of his or her withdrawal from service.

"(3) REEXAMINATION OF BENEFICIARIES RETIRED ON ACCOUNT OF DISABILITY. Once each year during the first five years following the retirement of a member on a disability retirement allowance and once every three-year period thereafter, the Board of Control may, and upon his or her application shall, require any disability beneficiary who has not yet attained age 60 if the beneficiary is a Tier I plan member or age 62 if the beneficiary is a Tier II plan member to undergo a medical examination, such examination to be made at the place of residence of such beneficiary or other place mutually agreed upon by a physician or physicians of or designated by the medical board. Should any disability beneficiary who has not yet attained age 60 if the beneficiary is a Tier I plan member or age 62 if the beneficiary is a Tier II plan member refuse to submit to such medical examination, his or her allowance may be discontinued until his or her withdrawal of such refusal, and, should his or her refusal continue for one year, all his or her rights in and to his or her pension may be revoked by the Board of Control; provided, that these requirements relative to the medical examination shall not apply in the case of a state policeman retired for disability and who has attained age 52 if he or she is a Tier I plan member or in the case of a state policeman or a correctional officer, firefighter, or law enforcement officer as defined in Section 36-27-59 with at least ten years of creditable service as a correctional officer, firefighter, or law enforcement officer retired for disability who has attained age 56 if he or she is a Tier II plan member. Should the medical board report and certify to the Board of Control that a disability beneficiary who is a Tier I plan member is engaged in or is able to engage in a gainful occupation paying more than the difference between his or her retirement allowance and his or her average final compensation and should the Board of Control concur in such report, then the amount of his or her pension shall be reduced to an amount which, together with his or her annuity and the amount earnable by him or her shall equal the amount of his or her average final compensation. Should his or her earning capacity be later changed, the amount of his or her pension may be further modified; provided, that the new pension shall not exceed the amount of the pension originally granted nor an amount which, when added to the amount earnable by the beneficiary, together with this annuity exceeds the amount of his or her average final compensation.

"Should the medical board report and certify to the Board of Control that a disability beneficiary who is a Tier II plan member has the capacity to engage in regular and substantial gainful employment, the Board of Control shall discontinue the beneficiary's retirement allowance until the beneficiary is otherwise eligible for service retirement.

"(c) Disposition of contributions and allowances upon death, etc., of member.

"(1) Should a member cease to be an employee except by death or by retirement under the provisions of this article, the contributions standing to the credit of his or her individual account in the Annuity Savings Fund shall be paid to him or her upon demand and, in addition to such payment, there shall be paid five-tenths of the interest accumulations standing to the credit of his or her individual account if he or she shall have not less than three but less than 16 years of membership service, six-tenths of such interest accumulations if he or she shall have not less than 16 but less than 21 years of membership service, seven-tenths of such interest accumulations if he or she shall have not less than 21 but less than 26 years of membership service and eight-tenths of such interest accumulations if he or she shall have not less than 26 years of membership service.

"(2) In case of the death of a member eligible for service retirement pursuant to subsection (a) of this section, an allowance shall be paid to the surviving spouse, or to such other person who the member shall have designated, in an amount that would have been payable if the member had retired immediately prior to his or her death and had elected Option 3, as set forth in subsection (d) of this section or, alternatively, if the surviving spouse or other designee desires, he or she may choose to receive, in lieu of the allowance provided under Option 3, the accumulated contributions of the member plus an amount equal to the accumulated contributions of the member not to exceed $5,000.00 or the accumulated contributions of the member plus the benefit provided by Section 36-27B-3 if a benefit is payable under such section;

"(3) In case of the death of a Tier I plan member not eligible for service retirement, after completion of 25 years of creditable service, an allowance shall be paid to the surviving spouse, or to such other person who the member shall have designated, in an amount that would have been payable if the member had retired for disability immediately prior to his or her death and had elected Option 3 as set forth in subsection (d) of this section or, alternatively, if the surviving spouse or other designee desires, he or she may choose to receive, in lieu of the allowance provided under Option 3, the accumulated contributions of the member plus an amount equal to the accumulated contributions of the member not to exceed $5,000.00 or the accumulated contributions of the member plus the benefit provided by Section 36-27B-3 if a benefit is payable under such section;

"(4) Upon the death of a member on account of whom no survivor allowance is payable under subdivisions (2) or (3) of this subsection, the accumulated contributions of the member plus an amount equal to the accumulated contributions not to exceed $5,000 or the accumulated contributions of the member plus the benefit provided by Section 36-27B-3 if a benefit is payable under such section shall be paid to his or her estate or to such person as he or she shall have nominated by written designation duly executed and filed with the Board of Control.

"(d) Optional allowances. With the provision that the election of an option shall be effective on the effective date of retirement, any member may elect prior to retirement to receive, in lieu of his or her retirement allowance payable throughout life, the actuarial equivalent, at that time, of his or her retirement allowance in a reduced retirement allowance payable throughout life with the provisions that:

"(1) OPTION 1. If he or she dies before he or she has received in annuity payments the present value of his or her annuity as it was at the time of his or her retirement, the balance shall be paid to his or her legal representatives or to such person as he or she shall nominate by written designation duly acknowledged and filed with the Board of Control;

"(2) OPTION 2. Upon his or her death, his or her reduced retirement allowance shall be continued throughout the life of and paid to such person as he or she shall nominate by written designation duly acknowledged and filed with the Board of Control at the time of his or her retirement;

"(3) OPTION 3. Upon his or her death, one half of his or her reduced allowance shall be continued throughout the life of and paid to such person as he or she shall nominate by written designation duly acknowledged and filed with the Board of Control at the time of his or her retirement; or

"(4) OPTION 4. Some other benefit or benefits shall be paid either to the member or to such person or persons as he or she shall nominate; provided, that such other benefits, together with the reduced retirement allowance, shall be certified by the actuary to be of equivalent actuarial value to his or her retirement allowance and shall be approved by the Board of Control.

"(5) OPTION 5. Upon retirement, the member may elect to receive a lump-sum cash payment equal to and in lieu of a portion of his or her retirement allowance, not to exceed 50 percent, provided that such benefit, together with the reduced retirement allowance, shall be equal to the present value equivalent of the actuarial value of his or her retirement allowance and provided that such benefit shall be certified by the actuary and approved by the Board of Control.

(e) The Retirement Systems of Alabama shall make available and provide financial counseling to any member that elects Option 5 as provided in subsection (d).

"(f) Prior to the close of each fiscal year, the Director of Finance shall certify to the Board of Control, the Governor, and the presiding officer of each house of the Legislature whether or not available funds are sufficient and economic conditions are satisfactory to support the financial viability of the retirement allowance provided in Option 5 in subdivision (5) of subsection (d). In the event that conditions are not satisfactory, Option 5, provided in subdivision (5) of subsection (d), shall be suspended for 12 months from the certification.

"(g) It is expressly provided that any benefits under this section shall be in addition to any other benefits provided by law for any employees of the state, and this section is specifically made supplemental to and shall be construed in pari materia with the employees' retirement law of the state.

"(e)(h) Effect of return to active service. Should any beneficiary be restored to active service, his or her retirement allowance shall be suspended until he or she again withdraws from service and he or she shall not again become a member of the retirement system nor shall he or she make contributions; except, that should such beneficiary who has been restored to active service continue in service for a period of two or more years from the date of his or her reentry into active service, he or she may request the Board of Control to allow him or her to again become a member of the retirement system. The Board of Control may grant the request for restoration to membership; provided, that such beneficiary whose retirement allowance has been suspended shall repay to the system all moneys received by him or her as benefits during any periods subsequent to the date of his or her reentry into active service and shall make a contribution equal to the amount he or she would have contributed had he or she been a member during the period of his or her restoration to active service on a suspended allowance basis together with the interest which would have been credited to the contributions on account of such period of restoration up to the date such contribution is made.

"(f)(1)(i)(1) REDETERMINATION, ETC., OF CERTAIN ALLOWANCES. All retirement allowance payments due on or after October 1, 1975, to members who retired prior to that date shall be redetermined as if the provisions of this section in effect on October 1, 1975, were in effect at the time the member retired. Anything in this article to the contrary notwithstanding, the annual retirement allowance of any member not employed as a state policeman who retired on or before January 1, 1956, shall not be less than $79.20 multiplied by the number of years of his or her creditable service not in excess of 30 years in the case of service retirement of $59.40 multiplied by the number of years of his or her creditable service not in excess of 30 years in the case of disability retirement. Any increase provided in the retirement allowance payment under this subdivision for a member who retired under the provisions of any optional benefit elected pursuant to subsection (d) of this section shall accrue only to the retired member, and no person designated to receive any payments after the death of a retired member under the provisions of any such optional benefit shall receive any increase in such payments under this subdivision. Notwithstanding, any member who retired prior to October 1, 1975, and who chose either Option 2 or Option 3 may elect to receive a reduced allowance and to stipulate that the actuarial equivalent of the increase in his or her retirement allowance, which became effective on that date, be ascribed to his or her designated beneficiary; provided, that such member shall clearly express this intention by filing a written application to the effect with the Secretary-Treasurer of the Employees' Retirement System of Alabama prior to October 1, 1976.

"(2) Any person who, prior to October 1, 1963, was in receipt of a benefit pursuant to Act No. 376, approved November 6, 1959, but was not a member of the system at the time of retirement shall not be entitled to receive an annual retirement allowance from the system, effective October 1, 1971, as follows:

"a. If such person was retired on or before January 1, 1956, an amount equal to $79.20 multiplied by the number of years of his or her creditable service not in excess of 30 years.

"b. If such person was retired after January 1, 1956, an amount equal to $72.00 multiplied by the number of years of his or her creditable service not in excess of 25 years.

"(3) Prior to October 31, 1975, any beneficiary may elect to leave on deposit with the system all or a specified part of any increase in his or her monthly retirement allowance payments arising in accordance with subdivisions (1) or (2) of this subsection over the monthly allowance which he or she was receiving prior to October 1, 1975. The portion of each monthly payment left in the system in accordance with such election shall be credited, together with regular interest thereon, to the individual account of such beneficiary. Upon the death of such beneficiary the total amount standing to his or her credit, including regular interest to the date of death, shall be paid in a lump sum to his or her legal representatives or to such person as he or she shall have nominated by written designation duly acknowledged and filed with the Board of Control.

"(g)(j) Notwithstanding any other provisions of this section to the contrary, when a designated beneficiary for a member predeceases the member who is receiving a monthly benefit allowance provided under Option 2, 3, or 4, or 5, the member may designate a replacement beneficiary for the deceased beneficiary to become effective two years after the date of designation of the replacement beneficiary and an actuarial adjustment in the monthly benefit allowance of the member to cover any cost associated with designating a replacement beneficiary shall be reflected thereafter in the monthly benefit allowance received by the member, commencing with the first benefit allowance check received by the member following the date of designation of the replacement beneficiary.

"(h)(k) Notwithstanding any provision of this section to the contrary, if a retired member who is receiving a monthly benefit allowance provided under Option 2, 3, or 4, or 5 divorces his or her designated beneficiary, the member may designate a replacement beneficiary for the beneficiary to become effective two years after the date of designation of the replacement beneficiary and an actuarial adjustment in the monthly benefit allowance of the member to cover any cost associated with designating a replacement beneficiary shall be reflected thereafter in the monthly benefit allowance received by the member, commencing with the first benefit allowance check received by the member following the date of designation of the replacement beneficiary.

"(i)(l) Any future act to increase the retirement age for Tier II plan members above the age of 62 shall require a two-thirds vote of the elected membership of each house of the Legislature.

§36-27-24.

"(a) Effective October 1, 1997, all the assets of the retirement system shall be credited according to the purpose for which they are held among three funds, namely, the Annuity Savings Fund, the Pension Accumulation Fund, and the Expense Fund. The operation of the former Pension Reserve Fund and the Annuity Reserve Fund shall be discontinued as of such date and the balance of the former Pension Reserve Fund shall be transferred to the Pension Accumulation Fund, and the balance of the former Annuity Reserve Fund shall be transferred to the Pension Accumulation Fund.

"(b) Annuity Savings Fund. The Annuity Savings Fund shall be a fund in which shall be accumulated contributions from the compensation of members to provide for their annuities.

"Contributions to and payments from the Annuity Savings Fund shall be made as follows: Effective October 1, 1971, each employer shall cause to be deducted from the salary of each member on each and every payroll of such employer for each and every payroll period five percent of his or her earnable compensation; except, that in the case of a state policeman, the rate of 10 percent of earnable compensation shall apply, and in computing all retirement benefits it shall be assumed that a seven percent rate of contribution had applied with respect to service as a state policeman prior to July 1, 1957. For all pay dates beginning on or after October 1, 2011, each employer, except those employers participating pursuant to Section 36-27-6, shall cause to be deducted from the salary of each member on each and every payroll of such employer for each and every payroll period seven and one-quarter percent (7.25%) of his or her earnable compensation; except, that in the case of a state policeman, the rate of ten percent (10%) of earnable compensation shall apply. For all pay dates beginning on or after October 1, 2012, each employer, except those employers participating pursuant to Section 36-27-6, shall cause to be deducted from the salary of each Tier I plan member on each and every payroll of such employer for each and every payroll period seven and one-half percent (7.5%) of his or her earnable compensation; except, that in the case of a state policeman, the rate of ten percent (10%) of earnable compensation shall apply. For all pay dates beginning on or after January 1, 2013, each employer shall cause to be deducted from the salary of each Tier II plan member on each and every payroll period six percent (6%) of his or her earnable compensation; except that in the case of a state policeman, the rate of ten percent (10%) shall apply and in the case of a correctional officer, firefighter, or law enforcement officer as defined in Section 36-27-59, the rate of seven percent (7%) shall apply. Any employer participating under Section 36-27-6, by adoption of a resolution, may elect for the increases in employee contributions provided by Act 2011-676 to be withheld from the earnable compensation of employees of the employer. In determining the amount earnable by a member in a payroll period, the Board of Control may consider the rate of annual compensation payable to such member on the first day of the payroll period as continuing through such payroll period, and it may omit deductions from compensation for any period less than a full payroll period if an employee was not a member on the first day of the payroll period, and, to facilitate the making of deductions, it may modify the deductions required of any member by such an amount as shall not exceed one tenth of one percent of the annual compensation upon the basis of which such deductions are made.

"The deductions provided for in this subsection shall be made notwithstanding that the minimum compensation provided for by law for any member shall be reduced thereby. Every member shall be deemed to consent and agree to the deduction made and provided for in this subsection and shall receipt for his or her full salary or compensation and payment of salary or compensation less such deductions shall be a full and complete discharge and acquittance of all claims and demands whatsoever for the services rendered by such person during the period covered by such payment, except as to the benefits provided under this article. The employer shall certify to the Board of Control in each and every payroll or in such other manner as the board may prescribe the amounts to be deducted, and each of the amounts shall be deducted and, when deducted, shall be paid into the Annuity Savings Fund and shall be credited, together with regular interest thereon, to the individual account of the member from whose compensation the deduction was made.

"In addition to the contributions deducted from compensation as provided in this subsection, subject to the approval of the Board of Control, any member may deposit in the Annuity Savings Fund by a single payment or by an increased rate of contribution an amount computed to be sufficient to purchase an additional annuity which, together with his or her prospective retirement allowance, will provide for him or her a total retirement allowance not to exceed one half of his or her average final compensation at age 60. Such additional amounts so deposited shall become a part of his or her accumulated contributions, except in the case of retirement, when they shall be treated as excess contributions returnable to the member in cash or as an annuity of equivalent actuarial value and shall not be considered in computing his or her pension.

"The contributions and interest credits of a member withdrawn by him or her or paid to his or her estate or to his or her designated beneficiary in event of his or her death shall be paid from the Annuity Savings Fund. Should a member cease to be a member other than by retirement under the provisions of this article, an amount equivalent to the difference, if any, between his or her accumulated contributions and the amount then paid shall be transferred to the Expense Fund. Upon the retirement of a member or the death of an eligible member where an allowance to a surviving spouse or other designated beneficiary is payable, his or her accumulated contributions shall be transferred from the Annuity Savings Fund to the Pension Accumulation Fund.

"Notwithstanding the preceding provisions, no deductions shall be made from any member's salary on account of which the employer's contributions are in default.

"The State Personnel Board, with the approval of the Governor, may provide that the state shall pick up member contributions to the Employees' Retirement System of Alabama as required by this subsection on behalf of all state employees who participate in the Employees' Retirement System by a corresponding reduction in the salary of the member, such pick-up to be mandatory for all such employees, and the contributions so picked up shall be treated as employer contributions in determining tax treatment under the Internal Revenue Code. These contributions shall be paid from the same source of funds which is used in paying earnings to the employee. If employee contributions are so picked up they shall be treated for all other purposes of state law in the same manner and to the same extent as employee contributions made prior to the date picked up.

"(c) Pension Accumulation Fund. The Pension Accumulation Fund shall be the fund in which shall be accumulated all reserves other than the amounts held in the Annuity Savings Fund for the payment of all pensions, all allowances granted to surviving spouses or other designated beneficiaries and other benefits payable from contributions made by the employer and from which shall be paid all pensions, all allowances granted to surviving spouses or other designated beneficiaries and other benefits on account of members with prior service credit.

"Contributions to and payments from the Pension Accumulation Fund shall be made as follows: On account of each member there shall be paid monthly by the employer an amount equal to a certain percentage of the earnable compensation of each member to be known as the "normal contribution" and an additional amount equal to a percentage of his or her earnable compensation to be known as the "accrued liability contribution," and these two amounts shall be paid monthly into the Pension Accumulation Fund; provided, that in the case of a state policeman, such percentage rates of contributions shall be calculated separately. Notwithstanding any other provision of law to the contrary, additionally, an amount equal to a certain percentage of earnable compensation as determined by the Director of Finance and certified to the Board of Control to support the debt service payment of the retirement allowance provided in Option 5 in subdivision (5) of subsection (d) of Section 36-27-16, to be known as the "lump-sum option contribution" shall be paid monthly to a designated fund within the State Treasury.

An amount equal to the lump-sum option contribution shall be transferred from the designated fund to the Alabama Pension Authority to pay for the corresponding debt service related to those retirement benefits.

The percentage rate of such contributions shall be fixed for each fiscal year on the basis of the liabilities of the retirement system as shown by the last annual actuarial valuation, and such percentage rate as established by such valuation shall take effect the following October 1 and continue in effect for the fiscal year.

"On the basis of regular interest and of such mortality and other tables as shall be adopted by the Board of Control, the actuary engaged by the board to make such valuation required by this article during the period over which the accrued liability contribution is payable shall, immediately after making such valuation, determine the uniform and constant percentage of the earnable compensation of the average new entrant which, if contributed on the basis of his or her compensation throughout his or her entire period of active service, would be sufficient to provide for the payment of any pension payable on his or her account. The percentage rate so determined shall be known as the "normal contribution" rate. The normal rate of contributions shall be determined by the actuary after each valuation.

"The accrued liability contribution rate shall be computed by the actuary on the basis of each valuation as the percentage rate of the total annual compensation of all members which is sufficient to liquidate the accrued liability over a period to be determined by the Board of Control which shall be not less than 10 nor more than 30 years.

"The unfunded accrued liability shall be computed by the actuary as the total liabilities of the system which are not dischargeable by the assets of the Annuity Savings Fund and the Pension Accumulation Fund and the present value of the aforesaid normal contributions.

"For purposes of computing the unfunded accrued liability the assets shall be determined as follows:

"On September 30, 1997, the assets shall be determined by using the market value of such assets. For subsequent years the value of the assets shall be determined by the system's actuary using a five year smoothed market value.

"The total amount payable in each year to the Pension Accumulation Fund shall be not less than the sum of the percentage rates known as the normal contribution rate and the accrued liability contribution rate of the total compensation earnable by all members during the preceding year.

"All interest and dividends earned on the funds of the retirement system shall be credited to the Pension Accumulation Fund. The amounts needed to allow a regular interest on the reserves in the Annuity Savings Fund shall be transferred in accordance with this article from the Pension Accumulation Fund. The Board of Control, in its discretion, may transfer to and from the Pension Accumulation Fund the amounts of any surplus or deficit which may develop in the Annuity Savings Fund, or the Expense Fund.

"Upon the death of a member on account of whom no survivor allowance is payable under subdivisions (2) and (3) of subsection (c) of Section 36-27-16, the death benefit as provided in subdivision (4) of subsection (c) of Section 36-27-16 equal to the accumulated contributions, not to exceed $5,000.00, shall be payable from the Pension Accumulation Fund.

"(d) Expense Fund. The Expense Fund shall be the fund from which the expenses of the administration of the retirement system shall be paid, exclusive of amounts payable as retirement allowances and as other benefits provided in this chapter. In addition thereto and on account of each member of the retirement system, there shall be paid monthly by the employer an amount equal to a certain percentage of the earnable compensation of each member for the administrative expenses of the retirement system. The percentage rate of such contribution shall be fixed by the Board of Control on the basis of the cost exclusive of that provided by interest not returnable. Any amounts credited to the accounts of the members withdrawing before retirement and not returnable under the provisions of subsection (c) of Section 36-27-16 shall be credited to the Expense Fund.

"(e) Employer's contributions. For each biennium beginning October 1, 1965, each employer shall pay to the retirement system the rates provided in this section and thereafter, at least 30 days preceding October 1 of each fiscal year, the Board of Control shall certify to the chief fiscal officer of each employer the percentage rates of earnable compensation of the members required to be paid to the retirement system in accordance with subsections (c) and (d) of this section.

"The employer's contribution on account of the membership of employees whose salaries are paid in whole or in part from funds derived from federal grants shall be paid from funds derived from the federal grants in accordance with statutes governing the administration of the grants and in proportion to salaries paid therefrom. At such time and in such manner as may be required, the Board of Control shall certify to each department of state receiving a federal grant the amount due and payable from the grant as the employer's contribution to the retirement system on account of the membership of the department whose salaries are paid in whole or in part from funds derived from such federal grants. The fiscal agent of the department shall authorize the state Comptroller to draw a warrant or warrants in payment of the amount certified as due and payable from federal grants.

"(f) Appropriations. There is hereby appropriated annually from the fund from which salaries of the employees of each employer are paid the amounts sufficient to carry out the provisions of this section. In the case of those departments supported wholly by transfers from other state funds, there is hereby appropriated from the supporting funds such additional amounts as may be necessary to pay the employer contribution of each department so supported in the same proportion as the other state funds contribute to the support and maintenance of such department.

"(g) Employer cost provided for in this article together with member contributions required under this article shall be paid to the Employees' Retirement System on the first day of the month following the month in which the related member salary is earned. Delinquent accounts shall accrue interest at the actuarial assumed investment rate beginning 30 days after the original due date. The member contributions for each member shall be reported to the Employees' Retirement System in a format prescribed by the Employees' Retirement System."

Section 5. (a) Notwithstanding any other provision of law to the contrary, within 12 months of the effective date of this act or within 12 months of separation from state service, a Tier I or Tier II plan member under the Employees' Retirement System who has 10 or more years of creditable service, who is no longer in service of this state, and who has not attained the age and years of service requirements to be eligible for retirement, may elect to receive a lump-sum cash payment equal to the present value equivalent of the actuarial value of his or her retirement allowance in lieu of his or her retirement allowance; provided that such benefit shall be certified by the actuary and shall be approved by the Board of Control.

(b) Prior to the close of each fiscal year, the Director of Finance shall certify to the Board of Control, the Governor, and the presiding officer of each house of the Legislature whether or not available funds are sufficient and economic conditions are satisfactory to support the financial viability of the lump-sum retirement allowance option provided under subsection (a). In the event that conditions are not satisfactory, the lump-sum retirement allowance option provided under subsection (a) shall be suspended for 12 months from date of certification.

Section 6. A retiree who has elected to take a lump-sum retirement allowance option as provided under Section 36-27-16, Code of Alabama 1975, or Section 5, may not elect to purchase prior service credit for which a lump-sum allowance was distributed, but may purchase service credit for any new retirement benefits earned after the distribution of the lump-sum allowance.

Section 7. Article 19 is added to Chapter 10 of Title 41, Code of Alabama 1975, to read as follows:

Article 19. Alabama Pension Authority.

§41-10-740.

For the purposes of this article, the following terms shall have the following meanings:

(1) APPROPRIATED FUNDS. The "lump-sum option contribution" amounts as determined by the Director of Finance in Section 16-25-21 and Section 36-27-24.

(2) AUTHORITY. The public corporation organized pursuant to this act.

(3) AUTHORITY OBLIGATIONS. Bonds of the authority.

(4) BONDS. Bonds of the authority issued for any authorized purpose.

(5) DEBT SERVICE. The principal of and interest, and premium, if any, on an obligation, including, without limitation, any principal required to be paid prior to its stated maturity, and any ongoing trustee or paying agent fees or fees of providers of credit enhancement or liquidity facilities.

(6) DIRECTORS. The Board of Directors of the Alabama Pension Authority.

(7) ELIGIBLE INVESTMENTS. a. Bonds or other obligations which as to principal and interest constitute direct obligations of, or are unconditionally guaranteed by, the United States of America, including obligations of any federal agency to the extent such obligations are unconditionally guaranteed by the United States of America and any certificates or any other evidences of an ownership interest in such obligations of, or unconditionally guaranteed by, the United States of America or in specified portions thereof, which may consist of the principal thereof or the interest thereon; b. Bonds, debentures, notes, or other evidences of indebtedness issued by any of the following agencies: Bank of Cooperatives; federal intermediate credit banks; Federal Financing Bank; federal home loan banks; Federal Farm Credit Bank; Export-Import Bank of the United States; federal land banks; Farmers Home Administration or any other agency or corporation which has been or may hereafter be created by or pursuant to an act of the Congress of the United States as an agency or instrumentality thereof; c. Bonds, notes, pass through securities, or other evidences of indebtedness of Government National Mortgage Association and participation certificates of Federal Home Loan Mortgage Corporation; d. Full faith and credit obligations of any state, provided that at the time of purchase such obligations are rated as least "AA" by Standard & Poor's Ratings Group and at least "AA" by Moody's Investor Service; e. Public housing bonds issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by contracts with the United States of America, or temporary notes, preliminary notes or project notes issued by public agencies or municipalities, in each case fully secured as to the payment of both principal and interest by a requisition or payment agreement with the United States of America; f. Time deposits evidenced by certificates of deposit issued by banks or savings and loan associations which are members of the Federal Deposit Insurance Corporation, provided that, to the extent such time deposits are not covered by federal deposit insurance, such time deposits (including interest thereon) are fully secured by a pledge of obligations described in paragraphs a., b., c., and e. above, which at all times have a market value not less than the amount of such bank time deposits required to be so secured and which meet the greater of 100 percent collateralization or the "AA" collateral levels established by Standard & Poor's Ratings Group for structured financing; g. Repurchase agreements for obligations of the type specified in paragraphs a., b., c., and e. above, provided such repurchase agreements are fully collateralized and secured by such obligations which have a market value at least equal to the purchase price of such repurchase agreements which are held by a depository satisfactory to the State Treasurer in such manner as may be required to provide a perfected security interest in such obligations, and which meet the greater of 100 percent collateralization or the "AA" collateral levels established by Standard & Poor's Rating Group for structured financings; and h. Uncollateralized investment agreements with, or certificates of deposit issued by banks or bank holding companies, the senior long-term securities of which are rated at least "AA" by Standard & Poor's Rating Group and at least "AA" by Moody's Investors Service.

(8) FINANCING AGREEMENT. Any loan, lease, agreement, grant agreement, financing agreement, credit agreement, security agreement, mortgage, indenture, guaranty agreement, or other type of agreement entered into by the authority in connection with the incurring of authority obligations.

(9) FUNDING AGREEMENT. An agreement between the state and the authority under which the state shall agree to pledge funds to the authority to be used for the payment, or to enhance the payment, of debt service on bonds issued by the authority; provided both of the following are satisfied:

(1) The such agreement shall have an initial term from the date of execution thereof through the September 30 immediately succeeding the date of execution and shall be subject to renewal, at the sole option of the state, for successive terms of 12 months each, each such term to coincide with the fiscal year.

(2) Any obligation on the part of the state to pay amounts required to be paid during any fiscal year of the state under such agreement shall constitute a limited obligation of the state payable solely out of the revenues and receipts of the state during the fiscal year during which any such amount is to be payable.

(10) RESERVE FUND. Any fund or account established by the authority in which moneys are placed in reserve to be used to pay the principal of or interest on bonds issued by the authority in the event funds pledged for the payment of debt service on such bonds are insufficient to timely satisfy the payment requirements.

§41-10-741.

(a) The Governor, the State Treasurer, and the Director of Finance may become a public corporation and public instrumentality of the state with the powers provided in this article, by proceeding according to subsection (b).

(b) To become the public corporation herein authorized, the Governor, the State Treasurer, and the Director of Finance shall present to the Secretary of State application signed by them setting forth all of the following:

(1) The name, official designation, and official residence of each of the applicants, together with a certified copy of the commission evidencing each applicant's right to office.

(2) The date on which each applicant was inducted into office and the term of office of each applicant.

(3) The name of the proposed public corporation, which shall be "Alabama Pension Authority."

(4) The location of the principal office of the proposed corporation, which shall be in the City of Montgomery.

(5) The applicants may also include in the application any other matters which are not inconsistent with this article or with any other laws of the state. The application shall be subscribed and sworn to by each of the applicants before an officer authorized by the laws of the state to take acknowledgments to deeds. The Secretary of State shall examine the application and, if he or she finds that it substantially complies with the requirements of this section, it shall be filed and recorded in an appropriate book of records in the office of the Secretary of State.

(c) When the application has been made, filed, and recorded, the applicants shall constitute a public corporation and public instrumentality of the state under the name set forth in the application and the Secretary of State shall make and issue to the applicants a certificate of incorporation pursuant to this act, under the Great Seal of the State, and shall record the certificate with the application. There shall be no fees paid to the Secretary of State for any service rendered or work performed in connection with the authority, its incorporation, dissolution or records.

§41-10-742.

(a) The applicants named in the application and their respective successors in office shall constitute the members of the authority. The Governor shall be the president of the authority, the State Treasurer shall be the vice president, and the Director of Finance shall be the secretary.

(b) The State Treasurer shall be treasurer of the authority, shall act as custodian of its funds, and shall, out of the funds appropriated to the authority and other funds available to the authority, pay debt service referable to bonds of the authority and amounts due with respect to any other obligations of the authority incurred pursuant to this article.

(c) The members of the authority shall constitute all the members of the directors of the authority, and any two members of the directors shall constitute a quorum for the transaction of business.

(d) Should any person holding any state office named in this section cease to hold the office by reason of death, resignation, expiration of the term of office, or for any other reason, his or her successor in office shall take the place as an officer and member of the directors of the authority.

(e) No officer or member of the directors of the authority shall receive any salary in addition to that now authorized by law for any service rendered or for any duty performed in connection with the authority.

(f) All proceedings held by the directors shall be reduced to writing by the secretary of the authority, shall be signed by at least two members of the authority present at the proceedings, and shall be recorded in a substantially bound book, and filed in the office of the Secretary of State. Copies of the proceedings, when certified by the secretary of the authority, under the seal of the authority, shall be received in all courts as prima facie evidence of the matters and things therein certified.

§41-10-743.

The authority, in addition to all other powers granted to it in this article, shall have all of the following powers:

(1) To have succession by its corporate name until dissolved as provided in this article.

(2) To institute and defend legal proceedings in any court of competent jurisdiction and proper venue; provided, however, that the authority may not be sued in any court other than the courts of the county in which is located the principal office of the authority, and provided further that the officers, directors, agents, and employees of the authority may not be sued for actions in behalf of the authority in any court other than the courts of the county in which is located the principal office of the authority.

(3) To have and to use a corporate seal and to alter the seal at pleasure.

(4) To establish a fiscal year.

(5) To acquire, purchase, lease, receive, hold, transmit, and convey the title to real and personal property to or from any person.

(6) To issue and incur authority obligations, whether or not the interest thereon is excluded from gross income for federal income tax purposes, for the purpose of financing lump-sum retirement payments as provided under Sections 1 through 6 of this act and to provide for the rights of the purchasers, holders, or owners of authority obligations.

(7) To anticipate by the incurrence of authority obligations the receipt of the revenues appropriated and pledged to the authority and any other revenues available to the authority.

(8) As security for the payment of authority obligations, to pledge the proceeds of the appropriations and pledges herein provided for and any other funds available to the authority.

(9) To arrange for various forms of security or credit enhancement for authority obligations, including letter of credit, guaranties, policies of insurance, surety bonds, and the like.

(10) To collect such fees and charges in connection with authority obligations and financing agreements, including, but not limited to, reimbursement of costs of financing, as the authority shall determine to be reasonable.

(11) To accept gifts, grants, loans, appropriations, and other forms of aid from the federal government, the state or any state agency, or any political subdivision of the state, or any person or corporation, foundation, or legal entity, and to agree to and comply with any conditions attached to federal and state financial assistance not inconsistent with this article.

(12) To establish accounts in one or more depositories.

(13) To transfer funds for the payment of debt service as necessary to accomplish the purposes of this act.

(14) To appoint, employ, contract with, and provide for the compensation of such employees and agents, including engineers, attorneys, contractors, consultants, accountants, fiscal advisors, trustees, paying agents, investment bankers, and underwriters as the directors deem necessary or desirable for the conduct of the business of the authority.

(15) To make, enter into, and execute financing agreements and such other contracts, agreements, or other instruments, and to take such other actions as may be necessary or convenient to accomplish any purpose for which the authority was organized or to exercise any power granted to it.

(16) To exercise any power granted by the laws of the state to public or private corporations which is not in conflict with the public purpose of this act.

(17) To adopt administrative rules necessary or appropriate to effectuate its purposes and to administer the programs authorized in this article.

§41-10-744.

(a) The authority is authorized from time to time to sell and issue its bonds for the purpose of financing the lump-sum retirement payments authorized under Sections 1 through 6 of this act, or any combination of the foregoing.

(b) The bonds of the authority shall be signed by its president and attested by its secretary and the seal of the authority shall be affixed. A facsimile of the signature of one or both of the officers may be printed or otherwise reproduced on any such bonds in lieu of being manually subscribed thereon and a facsimile of the seal of the authority may be printed or otherwise reproduced on any of the bonds in lieu of being manually affixed thereto. Any bonds of the authority may be executed and delivered by it at any time and from time to time, and shall be in the form and denominations and of such tenor and maturities, shall bear such rate or rates of interest, shall be payable at such times and evidenced in such manner, may be made subject to redemption at the option of the authority at such times and after such notice and on such conditions and at such redemption price or prices, and may contain such other provisions not inconsistent herewith, all as may be provided by the resolution of the directors of the authority under which the bonds are authorized to be issued. Bonds of the authority may be sold at public or private sale from time to time as the directors may consider advantageous.

(c) Subject to the provisions and limitations contained in this article, the authority may from time to time sell and issue refunding bonds for the purpose of refunding any matured or unmatured bonds of the authority then outstanding. The authority may pay out of the proceeds of the sale of refunding bonds such fees and the expenses of issuance which the said directors may deem necessary and advantageous in connection with the issuance of the refunding bonds; provided, however, that no refunding bonds shall be issued unless the present value of all debt service on the refunding bonds, computed with a discount rate equal to the true interest rate of the refunding bonds and taking into account all underwriting discount and other issuance expenses, shall not be greater than 95 percent of the present value of all debt service on the bonds to be refunded, computed using the same discount rate and taking into account the underwriting discount and other issuance expenses originally applicable to such bonds, determined as if such bonds to be refunded were paid and retired in accordance with the schedule of maturities, considering mandatory redemption as a scheduled maturity, provided at the time of their issuance.

(d)(1) Authority obligations shall not be general obligations of the authority but shall be payable solely from one or more of the following sources:

a. Appropriated funds.

b. The income or proceeds realized by the authority under any security granted to the authority.

c. Amounts derived from any letter of credit, insurance policy, or other form of credit enhancement applicable to the authority obligations.

d. Any reserve or other fund established for such purpose by the authority.

e. Any earnings on the proceeds of authority obligations invested by the authority pending their disbursement.

f. Any other amounts that may hereafter be appropriated to the authority.

(2) As security for the payment of the debt service referable to bonds issued by it, the authority is authorized and empowered to pledge for payment of such debt service and such obligations appropriated funds and other moneys and funds from which such authority obligations are made payable. All contracts made and all authority obligations issued or incurred by the authority pursuant to this article shall be solely and exclusively obligations of the authority and shall not constitute or create an obligation or debt of the state. Bonds issued by the authority shall be construed to be negotiable instruments, although payable solely from a specified source, as provided herein. The proceedings of the directors under which any authority obligations are authorized to be issued and any such mortgage and deed of trust or trust indenture may contain any agreements and provisions respecting the collection and disposition of appropriated funds, revenues, and receipts subject to such mortgage and deed of trust or trust indenture, the creation and maintenance of special funds from such appropriated funds, revenues, and receipts, the rights, duties, and remedies of the parties to any such instrument and the parties for the benefit of whom the instrument is made and the rights and remedies available in the event of default, all as the directors shall deem advisable. Any pledge made with respect to authority obligations shall be valid and binding from the time such pledge is made; the appropriated funds, revenues, receipts, funds, and other property so pledged shall immediately be subject to the lien of such pledge without any physical delivery thereof or further act; and the lien of pledge shall be valid and binding as against all parties having claims of any kind against the authority irrespective of whether the parties have notice thereof. Neither the proceedings of the directors authorizing the authority obligations nor any other instrument by which a pledge is created need be recorded. Each pledge, agreement, mortgage, and deed of trust or trust indenture made for the benefit or security of any of the authority obligations of the authority shall continue effective until the authority obligations have been fully paid or satisfied.

(e) Any bonds of the authority may be used by the holder as security for any funds belonging to the state, or to any political subdivision, instrumentality, or agency of the state, in any instance where security for the deposits may be required by law. Unless otherwise directed by the court having jurisdiction, or the document that is the source of authority, a trustee, executor, administrator, guardian, or one acting in any other fiduciary capacity, in addition to any other investment powers conferred by law and with the exercise of reasonable business prudence, may invest trust funds in bonds of the authority. Neither a public hearing nor consent of the Department of Finance or any other department or agency shall be a prerequisite to the issuance of bonds by the authority. Bonds of the authority shall be legal investments for funds of the Teachers' Retirement System of Alabama, the Employees' Retirement System of Alabama, and the State Insurance Fund.

(f) The State Treasurer shall be registrar, transfer agent, and paying agent for the bonds. The State Treasurer may designate named individuals who are employees of the state and who are assigned to the State Treasurer's office to authenticate the bonds.

§41-10-745.

(a) The authority is authorized and empowered to apply the proceeds of any bonds of the authority, together with any other available funds as follows:

(1) For the purposes for which the bonds were issued.

(2) To fund the reserves as the authority deems necessary and desirable.

(3) To the extent not needed for the foregoing uses, to pay or redeem the authority obligations.

(b) Pending the application of the proceeds of bonds of the authority to the purpose or purposes for which the bonds were issued, the proceeds and any moneys held in special funds created as security for the bonds may be invested by the authority in eligible investments, as the directors deem advisable. Any and all revenues, receipts, investment earnings, and other funds paid to, or otherwise coming into the possession of, the authority as a result of financings accomplished from the proceeds of bonds of the authority, shall be held, deposited, administered, invested, and applied as provided in the resolution of the directors authorizing the issuance of the authority obligations and as provided in any trust indenture or other agreement delivered in connection therewith, or otherwise as the authority may direct, consistent with the resolution, trust indenture, or other agreement and this article.

§41-10-746.

(a) For the purpose of providing funds to enable the authority to pay debt service referable to any bonds issued by it and other obligations incurred by the authority pursuant to this act, and to pay the costs of maintaining lump-sum retirement payments as provided in Sections 1 through 6, the authority may pay any other costs, expenses, or obligations of the authority, there is irrevocably pledged to such purpose and is appropriated to the authority so much as may be necessary therefor of the appropriated funds. All moneys hereby appropriated and pledged shall be deposited in a special fund maintained by the State Treasurer separate and apart from all other funds under his or her supervision, and the State Treasurer is directed to cause moneys in the special fund to be disbursed solely for the following purposes:

(1) Prior to dissolution of the authority, moneys on deposit in the special fund shall be disbursed by the State Treasurer in payment of debt service referable to authority obligations and in payment of other obligations of the authority incurred pursuant to this act.

(2) Promptly upon dissolution of the authority, the State Treasurer shall transfer all cash and securities on deposit in the special fund to the Retirement Systems of Alabama to be used to reduce the unfunded liability of the Teachers' Retirement System and the Employees' Retirement System.

(b) Pending disbursement for the above purposes, moneys on deposit in the special fund shall be invested by the State Treasurer in eligible investments as specified by the directors.

(c) The Governor, on behalf of the state, and the authority are hereby authorized to enter into a funding agreement pursuant to which the state may agree, in the event that moneys are withdrawn during any fiscal year of the state from any reserve fund established by the authority for any of its bonds owing to the inadequacy of pledged revenues to pay when due debt service thereon as herein provided for, to provide funds to the authority not in excess of the amount so withdrawn from whatever source lawfully available to the state for that purpose in order to fully fund such reserve fund in accordance with the proceedings of the authority pursuant to which the authority issued the bonds for which such reserve fund was established. Any funding agreement entered into pursuant hereto shall be executed by the Governor and countersigned by the Finance Director of the state and by the president of the authority and countersigned by the secretary of the authority.

§41-10-747.

(a) Upon the adoption by the directors of any resolution providing for the issuance of authority obligations, the authority may, in its discretion, cause to be published once a week for two consecutive weeks, in newspapers published or having a general circulation in the Cities of Birmingham, Montgomery, Huntsville, and Mobile, a notice in substantially the following form (the blanks being properly filled in) at the end of which shall be printed the name and title of either the president or the secretary of the authority:

"Alabama Pension Authority, a public corporation under the laws of the State of Alabama, on the _______ day of _____, authorized the issuance of $ ______ principal amount of bonds for purposes authorized in ______________________ of the Code of Alabama 1975. The proceeds from the sale of the bonds are proposed to be used to finance lump-sum retirement payments for certain retirees of the Teachers' Retirement System. Any action or proceeding questioning the validity of the bonds, the security thereof, the use of the proceeds thereof or the proceedings authorizing the bonds, shall be commenced within 30 days after the first publication of this notice."

(b) Any action or proceeding in any court to set aside or question the proceedings for the incurrence of the authority obligations referred to in the notice or to contest the validity of any authority obligations, or the validity of security therefor, or the validity of the proposed use of the proceeds thereof must be commenced within 30 days after the first publication of the notice. After the expiration of the period, no right of action or defense questioning or attacking any of the foregoing shall be asserted, nor shall the validity of the said proceedings, authority obligations, security or use of proceeds be open to question in any court on any ground whatsoever except in an action commenced within the period.

§41-10-748.

The income and property of the authority, all authority obligations and the interest paid on any such authority obligations, all conveyances by or to the authority, and all instruments by or to the authority shall be exempt from all taxation in the state. The authority shall also be exempt from all license and excise taxes imposed in respect of the privilege of engaging in any of the activities in which the authority may engage. The authority shall not be obligated to pay or allow any fees, taxes, or costs in the recording of any document to the judge of probate of any county.

§41-10-749. Except as may be expressly provided in this act, no proceeding, notice, or approval shall be required for the issuance of any authority obligations, the execution of any mortgage and deed of trust, trust indenture, or other document, or the exercise of any other of the powers of the authority. Neither a public hearing nor the consent of the Department of Finance shall be prerequisite to the issuance of authority obligations by the authority.

§41-10-750.

(a) At any time when no authority obligations are outstanding and the authority has no outstanding obligation with respect to lump-sum retirement payments as provided in Sections 1 through 6 of this act, the authority may be dissolved upon the filing with the Secretary of State of an application for dissolution, which shall be subscribed by each of the directors of the authority and sworn to by each director before an officer authorized to take acknowledgments to deeds.

(b) Upon the filing of the application for dissolution, the authority shall cease to exist. The Secretary of State shall file and record the application for dissolution in an appropriate book of record in his or her office, and shall make and issue, under the Great Seal of the State, a certificate that the authority is dissolved, and shall record the certificate with the application for dissolution. Title to all property held in the name of the authority shall be vested in the state upon dissolution of the authority.

Section 8. All laws or parts of laws which conflict with this act are hereby repealed.

Section 9. This act shall become effective immediately following its passage and approval by the Governor, or its otherwise becoming law. In order to allow time for the Retirement Systems of Alabama and the Department of Finance to implement the lump-sum option, Option 5 shall become available to all members who have a retirement date on or after October 1, 2017.

Retirement

Teachers' Retirement System

Authorities

Bonds

Retirement Systems

Finance Department

Code Amended