CHAPTER 155 HOUSE BILL No. 2014 An Act concerning retirement and pensions; relating to the Kansas public employees re-
tirement system and systems thereunder; benefits; purchase of service credit; appoint-
ment of officers and employees by board of regents; employer contribution rates; re-
tirement annuities of certain members of the legislature; death and disability benefits;
membership; issuance of revenue bonds; retirement payment dividends; amending
K.S.A. 74-4902, 74-4908, 74-4911f, 74-4918, 74-4920, 74-4925, 74-4927, 74-4927f, 74-
4927k, 74-4963, 74-4963a, 74-4964, 74-4964a and 74-49,110 and K.S.A. 2002 Supp. 20-
2610a and repealing the existing sections.
Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 2002 Supp. 20-2610a is hereby amended to read
as follows: 20-2610a. (a) A judge may elect to have such judge's retirement
annuity paid under one of the options provided in this section in lieu of
having it paid in the form stated in K.S.A. 20-2610 and amendments
thereto. Such election shall be made before the date of actual retirement.
A specific person shall be designated as joint annuitant at the time of
election of the joint and 1/2 to joint annuitant survivor option, joint and
survivor option and the joint and 3/4 to joint annuitant survivor option.
Under no circumstances may an option be changed or canceled nor the
named joint annuitant changed after the date of actual retirement of the
judge.

      (b) The amount of retirement annuity payable under an option shall
be based on the age of the judge and, if applicable, the age of the joint
annuitant, and shall be such amount as to be the actuarial equivalent of
the retirement annuity otherwise payable under K.S.A. 20-2610 and
amendments thereto as prescribed in subsection (c). Whenever the
amount of any benefit is to be determined on the basis of actuarial as-
sumptions, the assumptions shall be specified in a way that precludes
employer discretion. In no case shall the total amount of retirement an-
nuity payable under any option provided in this section be more than
100% of the retirement annuity which would have been otherwise payable
if no option had been elected under this section.

      (c) The following retirement options, which are subject to the pro-
visions of K.S.A. 74-49,123 and amendments thereto, are available:

      (1) Joint and 1/2 to joint annuitant survivor. A reduced retirement
annuity payable to the judge during the judge's lifetime in a monthly
amount equal to the product of (A) the monthly payment of the retire-
ment annuity otherwise payable under K.S.A. 20-2610 and amendments
thereto and (B) the percentage equal to 91% minus .4% for each year by
which the age of the judge's joint annuitant is less than the judge's age,
computed to the nearest whole year, or plus .4% for each year by which
the age of the judge's joint annuitant is more than the judge's age, com-
puted to the nearest whole year, with 1/2 of that monthly amount contin-
ued to the judge's joint annuitant during such joint annuitant's remaining
lifetime, if any, after the death of the judge. In the event that the desig-
nated joint annuitant under this option predeceases the retired judge, the
amount of the retirement annuity otherwise payable to the judge under
this option shall be adjusted automatically to the retirement annuity which
the judge would have received if no option had been elected under this
section.

      (2) Joint and survivor. A reduced retirement annuity payable to the
judge during the judge's lifetime in a monthly amount equal to the prod-
uct of (A) the monthly payment of the retirement annuity otherwise pay-
able under K.S.A. 20-2610 and amendments thereto and (B) the per-
centage equal to 83% minus .6% for each year by which the age of the
judge's joint annuitant is less than the judge's age, computed to the near-
est whole year, or plus .6% for each year by which the age of the judge's
joint annuitant is more than the judge's age, computed to the nearest
whole year, with that monthly amount continued to the joint annuitant
during the joint annuitant's remaining lifetime, if any, after the death of
judge. In the event that the designated joint annuitant under this option
predeceases the retired judge, the amount of the retirement annuity oth-
erwise payable to the judge under this option shall be adjusted automat-
ically to the retirement annuity which the judge would have received if
no option had been elected under this section.

      (3) Joint and 3/4 to joint annuitant survivor. A reduced retirement
annuity payable to the judge during the judge's lifetime in a monthly
amount equal to the product of (A) the monthly payment of the retire-
ment annuity otherwise payable under K.S.A. 20-2610 and amendments
thereto and (B) the percentage equal to 87% minus .5% for each year by
which the age of the judge's joint annuitant is less than the judge's age,
computed to the nearest whole year, or plus .5% for each year by which
the age of the judge's joint annuitant is more than the judge's age, com-
puted to the nearest whole year, with 3/4 of that monthly amount contin-
ued to the judge's joint annuitant during such joint annuitant's remaining
lifetime, if any, after the death of the judge. In the event that the desig-
nated joint annuitant under this option predeceases the retired judge, the
amount of the retirement annuity otherwise payable to the judge under
this option shall be adjusted automatically to the retirement annuity which
the judge would have received if no option had been elected under this
section.

      (4) Life with 5 years certain. A reduced retirement annuity payable
to the judge during the judge's lifetime in a monthly amount equal to
98% of the monthly payment of the retirement annuity otherwise payable
under K.S.A. 20-2610 and amendments thereto and if the judge dies
within the five-year certain period, measured from the commencement
of retirement annuity payments, such monthly payments shall be contin-
ued to such judge's beneficiary during the balance of the five-year certain
period.

      (5) Life with 10 years certain. A reduced retirement annuity payable
to the judge during the judge's lifetime in a monthly amount equal to
95% of the monthly payment of the retirement annuity otherwise payable
under K.S.A. 20-2610 and amendments thereto and if the judge dies
within the ten-year certain period, measured from the commencement
of retirement annuity payments, such monthly payments shall be contin-
ued to such judge's beneficiary during the balance of the ten-year certain
period.

      (6) Life with 15 years certain. A reduced retirement annuity payable
to the judge during the judge's lifetime in a monthly amount equal to
88% of the monthly payment of the retirement annuity otherwise payable
under K.S.A. 20-2610 and amendments thereto and if the judge dies
within the fifteen-year certain period, measured from the commence-
ment of retirement annuity payments, such monthly payments shall be
continued to such judge's beneficiary during the balance of the fifteen-
year certain period.

      (7) Lump sum payment at retirement. (A) Pursuant to this option,
the judge must specify a lump sum amount to be paid to the judge upon
the judge's retirement. The lump sum amount will be based on the ac-
tuarial present value of the benefit as provided in K.S.A. 20-2610, and
amendments thereto. The lump sum amount designated by the judge
must be in 10% increments and shall not exceed 1/2 of the actuarial present
value of the benefit provided in K.S.A. 20-2610, and amendments thereto.
If the judge's spouse elects a lump sum payment as provided in this section
pursuant to the provisions of subsection (d), the lump sum payment will
be based on the present value of the retirement option selected by the
spouse. The lump sum amount designated by the spouse must be in 10%
increments and shall not exceed 1/2 of the actuarial present value of the
option selected in this section.

      (B) Pursuant to this option, the judge must elect to have the remain-
ing actuarial present value paid in a monthly amount under the provisions
of K.S.A. 20-2610, and amendments thereto, or subsections (c)(1)
through (c)(6) of this section.

      (C) In the event that the designated joint annuitant pursuant to sub-
section (c)(1), (c)(2) or (c)(3), under this option predeceases the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under the option shall be adjusted automatically to the retirement benefit
which the retirant would have received if no option had been elected
under this section.

      (D) The provisions of this subsection shall be effective on and after
July 1, 2001.

      (d) If a judge, who is eligible to retire, dies without having actually
retired, the judge's spouse, if the spouse is the sole beneficiary for the
judge's accumulated contributions, may elect to receive benefits as a joint
annuitant under one of the options provided in this section in lieu of
receiving the judge's accumulated contributions.

      (e) On and after July 1, 1993, if a judge with 15 or more years of
credited service dies before attaining retirement age, the judge's spouse,
if the spouse is the sole beneficiary for the judge's accumulated contri-
butions, may elect to receive benefits under one of the options provided
in this section in lieu of receiving the judge's accumulated contributions.
Payments under one of the options provided in this section to the judge's
spouse if so elected, shall commence on the date that the judge would
have first attained retirement age.

      (f) Benefits payable to a joint annuitant shall accrue from the first
day of the month following the death of a member or retirant and, in the
case of the joint and 1/2 to joint annuitant survivor option, the joint and
survivor option and the joint and 3/4 to joint annuitant survivor option,
shall end on the last day of the month in which the joint annuitant dies.

      (g) The provisions of the law in effect on the retirement date of a
judge under the retirement system for judges shall govern the retirement
annuity payable to the retired judge and any joint annuitant, except, for
retirement benefits payable after July 1, 1993, for judges who retired prior
to July 1, 1982, in the event that the designated joint annuitant under the
option provided in subsection (c)(1), (2) or (3), as applicable, predeceased
the judge, the amount of the retirement benefit otherwise payable to the
judge under the option provided in subsection (c)(1), (2) or (3), as appli-
cable, shall be adjusted automatically to the retirement benefit which the
judge would have received if no option had been elected under this sec-
tion.

      (h) Upon the death of a joint annuitant who is receiving a retirement
benefit under the provisions of this section, there shall be paid to such
joint annuitant's beneficiary an amount equal to the excess, if any, of the
accumulated contributions of the retired judge over the sum of all retire-
ment benefit payments made to such retired judge and such joint annu-
itant. Such joint annuitant shall designate a beneficiary by filing in the
office of the retirement system such designation at the time of death of
the retired judge. If there is no named beneficiary of such joint annuitant
living at the time of death of such joint annuitant, any amount provided
for by this section shall be paid to, in order of preference as follows:

      (1) The joint annuitant's surviving spouse;

      (2) the joint annuitant's dependent child or children;

      (3) the joint annuitant's dependent parent or parents;

      (4) the joint annuitant's nondependent child or children;

      (5) the joint annuitant's nondependent parent or parents; or

      (6) the estate of the deceased joint annuitant.

      (i) In any event, benefits shall be adjusted as necessary to satisfy the
incidental death benefits regulations under the federal internal revenue
code.

      Sec.  2. K.S.A. 74-4902 is hereby amended to read as follows: 74-
4902. As used in articles 49 and 49a of chapter 74 and amendments
thereto, unless otherwise provided or the context otherwise requires:

      (1) ``Accumulated contributions'' means the sum of all contributions
by a member to the system which are credited to the member's account,
with interest allowed thereon;

      (2) ``acts'' means the provisions of articles 49 and 49a of the Kansas
Statutes Annotated and amendments thereto;

      (3) ``actuarial equivalent'' means an annuity or benefit of equal value
to the accumulated contributions, annuity or benefit, when computed
upon the basis of the actuarial tables in use by the system. Whenever the
amount of any benefit is to be determined on the basis of actuarial as-
sumptions, the assumptions shall be specified in a way that precludes
employer discretion;

      (4) ``actuarial tables'' means the actuarial tables approved and in use
by the board at any given time;

      (5) ``actuary'' means the actuary or firm of actuaries employed or
retained by the board at any given time;

      (6) ``agent'' means the individual designated by each participating em-
ployer through whom system transactions and communication are di-
rected;

      (7) ``beneficiary'' means any natural person or persons or estate
named by a member to receive any benefits as provided for by this act.
Designations of beneficiaries by a member who is a member of more
than one retirement system made on or after July 1, 1987, shall be the
basis of any benefits payable under all systems unless otherwise provided
by law. Except as otherwise provided by subsection (33) of this section,
if there is no named beneficiary living at time of member's death, any
benefits provided for by this act shall be paid to: (A) The member's sur-
viving spouse; (B) the member's dependent child or children; (C) the
member's dependent parent or parents; (D) the member's nondependent
child or children; (E) the member's nondependent parent or parents; (F)
the estate of the deceased member; in the order of preference as specified
in this subsection.

      (8) ``board of trustees,'' ``board'' or ``trustees'' means the managing
body of the system which is known as the Kansas public employees re-
tirement system board of trustees;

      (9) ``compensation'' means, except as otherwise provided, all salary,
wages and other remuneration payable to a member for personal services
performed for a participating employer, including maintenance or any
allowance in lieu thereof provided a member as part of compensation,
but not including reimbursement for travel or moving expenses or on and
after July 1, 1994, payment pursuant to an early retirement incentive
program made prior to the retirement of the member. Beginning with
the employer's fiscal year which begins in calendar year 1991 or for em-
ployers other than the state of Kansas, beginning with the fiscal year
which begins in calendar year 1992, when the compensation of a member
who remains in substantially the same position during any two consecutive
years of participating service used in calculating final average salary is
increased by an amount which exceeds 15%, then the amount of such
increase which exceeds 15% shall not be included in compensation, ex-
cept that (A) any amount of compensation for accumulated sick leave or
vacation or annual leave paid to the member, (B) any increase in com-
pensation for any member due to a reclassification or reallocation of such
member's position or a reassignment of such member's job classification
to a higher range or level and (C) any increase in compensation as pro-
vided in any contract entered into prior to January 1, 1991, and still in
force on the effective date of this act, pursuant to an early retirement
incentive program as provided in K.S.A. 72-5395 et seq. and amendments
thereto, shall be included in the amount of compensation of such member
used in determining such member's final average salary and shall not be
subject to the 15% limitation provided in this subsection. Any contribu-
tions by such member on the amount of such increase which exceeds
15% which is not included in compensation shall be returned to the mem-
ber. Unless otherwise provided by law, beginning with the employer's
fiscal year coinciding with or following July 1, 1985, compensation shall
include any amounts for tax sheltered annuities or deferred compensation
plans. Beginning with the employer's fiscal year which begins in calendar
year 1991, compensation shall include amounts under sections 403b, 457
and 125 of the federal internal revenue code of 1986 and, as the board
deems appropriate, any other section of the federal internal revenue code
of 1986 which defers or excludes amounts from inclusion in income. For
purposes of applying limits under the federal internal revenue code ``com-
pensation'' shall have the meaning as provided in K.S.A. 74-49,123 and
amendments thereto;

      (10) ``credited service'' means the sum of participating service and
prior service and in no event shall credited service include any service
which is credited under another retirement plan authorized under any
law of this state;

      (11) ``dependent'' means a parent or child of a member who is de-
pendent upon the member for at least 1/2 of such parent or child's support;

      (12) ``effective date'' means the date upon which the system becomes
effective by operation of law;

      (13) ``eligible employer'' means the state of Kansas, and any county,
city, township, special district or any instrumentality of any one or several
of the aforementioned or any noncommercial public television or radio
station located in this state which receives state funds allocated by the
Kansas public broadcasting commission whose employees are covered by
social security. If a class or several classes of employees of any above
defined employer are not covered by social security, such employer shall
be deemed an eligible employer only with respect to such class or those
classes of employees who are covered by social security;

      (14) ``employee'' means any appointed or elective officer or employee
of a participating employer whose employment is not seasonal or tem-
porary and whose employment requires at least 1,000 hours of work per
year, and any such officer or employee who is concurrently employed
performing similar or related tasks by two or more participating employ-
ers, who each remit employer and employee contributions on behalf of
such officer or employee to the system, and whose combined employment
is not seasonal or temporary, and whose combined employment requires
at least 1,000 hours of work per year, but not including: (A) Any employee
who is a contributing member of the United States civil service retirement
system; (B) any employee who is a contributing member of the federal
employees retirement system; (C) any employee who is a leased employee
as provided in section 414 of the federal internal revenue code of a par-
ticipating employer; and (D) any employee or class of employees specif-
ically exempted by law. After June 30, 1975, no person who is otherwise
eligible for membership in the Kansas public employees retirement sys-
tem shall be barred from such membership by reason of coverage by,
eligibility for or future eligibility for a retirement annuity under the pro-
visions of K.S.A. 74-4925 and amendments thereto, except that no person
shall receive service credit under the Kansas public employees retirement
system for any period of service for which benefits accrue or are granted
under a retirement annuity plan under the provisions of K.S.A. 74-4925
and amendments thereto. After June 30, 1982, no person who is otherwise
eligible for membership in the Kansas public employees retirement sys-
tem shall be barred from such membership by reason of coverage by,
eligibility for or future eligibility for any benefit under another retirement
plan authorized under any law of this state, except that no such person
shall receive service credit under the Kansas public employees retirement
system for any period of service for which any benefit accrues or is
granted under any such retirement plan. Employee shall include persons
who are in training at or employed by, or both, a sheltered workshop for
the blind operated by the secretary of social and rehabilitation services.
The entry date for such persons shall be the beginning of the first pay
period of the fiscal year commencing in calendar year 1986. Such persons
shall be granted prior service credit in accordance with K.S.A. 74-4913
and amendments thereto. However, such persons classified as home in-
dustry employees shall not be covered by the retirement system. Em-
ployees shall include any member of a board of county commissioners of
any county and any council member or commissioner of a city whose
compensation is equal to or exceeds $5,000 per year;

      (15) ``entry date'' means the date as of which an eligible employer
joins the system. The first entry date pursuant to this act is January 1,
1962;

      (16) ``executive director'' means the managing officer of the system
employed by the board under this act;

      (17) ``final average salary'' means in the case of a member who retires
prior to January 1, 1977, and in the case of a member who retires after
January 1, 1977, and who has less than five years of participating service
after January 1, 1967, the average highest annual compensation paid to
such member for any five years of the last 10 years of participating service
immediately preceding retirement or termination of employment, or in
the case of a member who retires on or after January 1, 1977, and who
has five or more years of participating service after January 1, 1967, the
average highest annual compensation paid to such member on or after
January 1, 1967, for any five years of participating service preceding re-
tirement or termination of employment, or, in any case, if participating
service is less than five years, then the average annual compensation paid
to the member during the full period of participating service, or, in any
case, if the member has less than one calendar year of participating service
such member's final average salary shall be computed by multiplying such
member's highest monthly salary received in that year by 12; in the case
of a member who became a member under subsection (3) of K.S.A. 74-
4925 and amendments thereto, or who became a member with a partic-
ipating employer as defined in subsection (3) of K.S.A. 74-4931 and
amendments thereto and who elects to have compensation paid in other
than 12 equal installments, such compensation shall be annualized as if
the member had elected to receive 12 equal installments for any such
periods preceding retirement; in the case of a member who retires after
July 1, 1987, the average highest annual compensation paid to such mem-
ber for any four years of participating service preceding retirement or
termination of employment; in the case of a member who retires on or
after July 1, 1993, whose date of membership in the system is prior to
July 1, 1993, and any member who is in such member's membership
waiting period on July 1, 1993, and whose date of membership in the
system is on or after July 1, 1993, the average highest annual compen-
sation, as defined in subsection (9), paid to such member for any four
years of participating service preceding retirement or termination of em-
ployment or the average highest annual salary, as defined in subsection
(34), paid to such member for any three years of participating service
preceding retirement or termination of employment, whichever is
greater; and in the case of a member who retires on or after July 1, 1993,
and whose date of membership in the system is on or after July 1, 1993,
the average highest annual salary, as defined in subsection (34), paid to
such member for any three years of participating service preceding re-
tirement or termination of employment. Final average salary shall not
include any purchase of participating service credit by a member as pro-
vided in subsection (2) of K.S.A. 74-4919h and amendments thereto
which is completed within five years of retirement. For any application
to purchase or repurchase service credit for a certain period of service as
provided by law received by the system after May 17, 1994, for any mem-
ber who will have contributions deducted from such member's compen-
sation at a percentage rate equal to two or three times the employee's
rate of contribution or will begin paying to the system a lump-sum amount
for such member's purchase or repurchase and such deductions or lump-
sum payment commences after the commencement of the first payroll
period in the third quarter, ``final average salary'' shall not include any
amount of compensation or salary which is based on such member's pur-
chase or repurchase. Any application to purchase or repurchase multiple
periods of service shall be treated as multiple applications. For purposes
of this subsection, the date that such member is first hired as an employee
for members who are employees of employers that elected to participate
in the system on or after January 1, 1994, shall be the date that such
employee's employer elected to participate in the system. In the case of
any former member who was eligible for assistance pursuant to K.S.A.
74-4925 and amendments thereto prior to July 1, 1998, for the purpose
of calculating final average salary of such member, such member's final
average salary shall be based on such member's salary while a member
of the system or while eligible for assistance pursuant to K.S.A. 74-4925
and amendments thereto, whichever is greater;

      (18) ``fiscal year'' means, for the Kansas public employees retirement
system, the period commencing July 1 of any year and ending June 30 of
the next;

      (19) ``Kansas public employees retirement fund'' means the fund cre-
ated by this act for payment of expenses and benefits under the system
and referred to as the fund;

      (20) ``leave of absence'' means a period of absence from employment
without pay, authorized and approved by the employer, and which after
the effective date does not exceed one year;

      (21) ``member'' means an eligible employee who is in the system and
is making the required employee contributions; any former employee who
has made the required contributions to the system and has not received
a refund if such member is within five years of termination of employment
with a participating employer; or any former employee who has made the
required contributions to the system, has not yet received a refund and
has been granted a vested benefit;

      (22) ``military service'' means service in the uniformed forces of the
United States, for which retirement benefit credit must be given under
the provisions of USERRA or service in the armed forces of the United
States or in the commissioned corps of the United States public health
service, which service is immediately preceded by a period of employ-
ment as an employee or by the entering into of an employment contract
with a participating employer and is followed by return to employment
as an employee with the same or another participating employer within
12 months immediately following discharge from such military service,
except that if the board determines that such return within 12 months
was made impossible by reason of a service-connected disability, the pe-
riod within which the employee must return to employment with a par-
ticipating employer shall be extended not more than two years from the
date of discharge or separation from military service;

      (23) ``normal retirement date'' means the date on or after which a
member may retire with full retirement benefits pursuant to K.S.A. 74-
4914 and amendments thereto;

      (24) ``participating employer'' means an eligible employer who has
agreed to make contributions to the system on behalf of its employees;

      (25) ``participating service'' means the period of employment after
the entry date for which credit is granted a member;

      (26) ``prior service'' means the period of employment of a member
prior to the entry date for which credit is granted a member under this
act;

      (27) ``prior service annual salary'' means the highest annual salary,
not including any amounts received as payment for overtime or as re-
imbursement for travel or moving expense, received for personal services
by the member from the current employer in any one of the three cal-
endar years immediately preceding January 1, 1962, or the entry date of
the employer, whichever is later, except that if a member entered the
employment of the state during the calendar year 1961, the prior service
annual salary shall be computed by multiplying such member's highest
monthly salary received in that year by 12;

      (28) ``retirant'' means a member who has retired under this system;

      (29) ``retirement benefit'' means a monthly income or the actuarial
equivalent thereof paid in such manner as specified by the member pur-
suant to this act or as otherwise allowed to be paid at the discretion of
the board, with benefits accruing from the first day of the month coin-
ciding with or following retirement and ending on the last day of the
month in which death occurs. Upon proper identification a surviving
spouse may negotiate the warrant issued in the name of the retirant. If
there is no surviving spouse, the last warrant shall be payable to the des-
ignated beneficiary;

      (30) ``retirement system'' or ``system'' means the Kansas public em-
ployees retirement system as established by this act and as it may be
amended;

      (31) ``social security'' means the old age, survivors and disability in-
surance section of the federal social security act;

      (32) ``total disability'' means a physical or mental disability which pre-
vents the member from engaging, for remuneration or profit, in any oc-
cupation for which the member is reasonably suited by education, training
or experience;

      (33) ``trust'' means an express trust, created by a trust instrument,
including a will, designated by a member to receive payment of the in-
sured death benefit under K.S.A. 74-4927 and amendments thereto and
payment of the member's accumulated contributions under subsection
(1) of K.S.A. 74-4916 and amendments thereto. A designation of a trust
shall be filed with the board. If there is a designated trust at the time of
the member's death, the insured death benefit for the member under
K.S.A. 74-4927 and amendments thereto and the member's accumulated
contributions under subsection (1) of K.S.A. 74-4916 and amendments
thereto shall be paid to the trust in lieu of the member's beneficiary. If
no will is admitted to probate within six months after the death of the
member or no trustee qualifies within such six months or if the designated
trust fails, for any reason whatsoever, the insured death benefit under
K.S.A. 74-4927 and amendments thereto and the member's accumulated
contributions under subsection (1) of K.S.A. 74-4916 and amendments
thereto shall be paid in accordance with the provisions of subsection (7)
of this section as in other cases where there is no named beneficiary living
at the time of the member's death and any payments so made shall be a
full discharge and release to the system from any further claims;

      (34) ``salary'' means all salary and wages payable to a member for
personal services performed for a participating employer, including main-
tenance or any allowance in lieu thereof provided a member as part of
salary. Salary shall not include reimbursement for travel or moving ex-
penses, payment for accumulated sick leave or vacation or annual leave,
severance pay or any other payments to the member determined by the
board to not be payments for personal services performed for a partici-
pating employer constituting salary or on and after July 1, 1994, payment
pursuant to an early retirement incentive program made prior to the
retirement of the member. When the salary of a member who remains
in substantially the same position during any two consecutive years of
participating service used in calculating final average salary is increased
by an amount which exceeds 15%, then the amount of such increase
which exceeds 15% shall not be included in salary. Any contributions by
such member on the amount of such increase which exceeds 15% which
is not included in compensation shall be returned to the member. Unless
otherwise provided by law, salary shall include any amounts for tax shel-
tered annuities or deferred compensation plans. Salary shall include
amounts under sections 403b, 457 and 125 of the federal internal revenue
code of 1986 and, as the board deems appropriate, any other section of
the federal internal revenue code of 1986 which defers or excludes
amounts from inclusion in income. For purposes of applying limits under
the federal internal revenue code ``salary'' shall have the meaning as pro-
vided in K.S.A. 74-49,123 and amendments thereto. In any case, if par-
ticipating service is less than three years, then the average annual salary
paid to the member during the full period of participating service, or, in
any case, if the member has less than one calendar year of participating
service such member's final average salary shall be computed by multi-
plying such member's highest monthly salary received in that year by 12;

      (35) ``federal internal revenue code'' means the federal internal rev-
enue code of 1954 or 1986, as in effect on July 1, 1998 2002, and as
applicable to a governmental plan; and

      (36) ``USERRA'' means the federal uniformed services employment
and reemployment rights act of 1994 as in effect on July 1, 1998.

      Sec.  3. K.S.A. 74-4908 is hereby amended to read as follows: 74-
4908. (1) The board shall appoint an executive director and shall establish
the compensation therefor. Subject to the direction of the board, the
executive director shall be the managing officer of the system and as such
shall have charge of the office, records and supervision and direction of
the employees of the system. The executive director shall be in the un-
classified service under the Kansas civil service act.

      (2) The executive director shall recommend to the board the admin-
istrative organization, the number and qualifications of employees nec-
essary to carry out the intent of this act and the directions of the board.
Upon approval of the board, the executive director is authorized to em-
ploy such persons in accordance with the Kansas civil service act.

      (3) The board of trustees shall select and employ or retain a qualified
actuary who shall serve at its pleasure as its technical advisor on matters
regarding operation of the system. The actuary shall:

      (a) Make an annual valuation of the liabilities and reserves of the
system, and a determination of the contributions required by the system
to discharge its liabilities and administrative costs under this act, and
recommend to the board rates of employer contributions required to
establish and maintain the system on an actuarial reserve basis. Such
recommended employer contributions shall not be based on any other
purpose outside of the needs of the system as prescribed by this subsec-
tion.

      (b) As soon after the effective date as practicable and once every
three years thereafter, make a general investigation of the actuarial ex-
perience under the system including mortality, retirement, employment
turnover and interest, and recommend actuarial tables for use in valua-
tions and in calculating actuarial equivalent values based on such inves-
tigation.

      (c) Cooperate with and provide any assistance to the actuary, the
legislative coordinating council and the joint committee on pensions, in-
vestments and benefits related to the independent actuarial audit and
evaluation as provided in K.S.A. 74-4908a and amendments thereto.

      (d) Perform such other duties as may be assigned by the board.

      (4) The attorney general of the state shall furnish such legal services
as may be necessary upon receipt of a request from the board, except
that legal services may be furnished by other counsel as the board in its
discretion deems necessary and prudent.

      (5) The board shall employ or retain qualified investment counsel or
counselors or may negotiate with a trust company to assist and advise in
the judicious investment of funds as herein provided.

      (6) The Subject to limitations imposed pursuant to this subsection and
otherwise provided by law, the board may appoint a deputy executive
director, an investment officer, an investment analyst, a real estate man-
ager, a direct placement manager, a chief fiscal officer, a member services
officer, an attorney, an assistant investment officer, an information re-
source officer and an investment operations analyst such officers and em-
ployees necessary to advise and assist the board in the performance of
powers, duties and functions relating to the management and investment
of the fund and in such other matters as may be directed by the board.
Such appointed officers and employees shall be in the unclassified service
under the Kansas civil service act. Not more than 25% of the total number
of officers and employees appointed or employed by the system shall be
in the unclassified service. The provisions of this subsection shall not affect
the classified status of any employee in the classified service under the
Kansas civil service act who is employed on the date immediately preced-
ing the effective date of this act. The board is authorized to assign any
new or vacant position created by the system on or after the effective date
of this act to the classified or unclassified service under the Kansas civil
service act. The compensation of such appointed officers and employees
in the unclassified service under the Kansas civil service act shall be es-
tablished by the board.

      (7) The board may establish a program for the paying of bonus awards
to unclassified officers and employees pursuant to procedures established
by the board.

      Sec.  4. K.S.A. 74-4918 is hereby amended to read as follows: 74-
4918. (1) A member may elect to have such member's retirement benefit
paid under one of the options provided in this section in lieu of having it
paid in the form stated in K.S.A. 74-4915 and amendments thereto. Such
election must be made before the date of actual retirement. A specific
person must be designated as joint annuitant at the time of election of
the joint and 1/2 to joint annuitant survivor option, the joint and survivor
option and the joint and 3/4 to joint annuitant survivor option. Under no
circumstances may an option be changed or canceled nor the named joint
annuitant changed after the date of actual retirement of the member.

      (2) The amount of retirement benefit payable under an option shall
be based on the age of the member and, if applicable, the age of the joint
annuitant, and shall be such amount as to be the actuarial equivalent of
the retirement benefit otherwise payable under K.S.A. 74-4915 and
amendments thereto, as prescribed in subsection (3). In no case shall the
total amount of retirement benefit paid under any option provided in this
section be more than 100% of the retirement benefit which would have
been otherwise payable if no option had been elected under this section.

      (3) The following retirement options, which are subject to the pro-
visions of K.S.A. 74-49,123 and amendments thereto, are available:

      (A) Joint and 1/2 to joint annuitant survivor. A reduced retirement
benefit is payable to the retirant during the retirant's lifetime in a monthly
amount equal to the product of (i) the monthly payment of the retirement
benefit otherwise payable under K.S.A. 74-4915 and amendments thereto
and (ii) the percentage equal to 91% minus .4% for each year by which
the age of the retirant's joint annuitant is less than the retirant's age,
computed to the nearest whole year, or plus .4% for each year by which
the age of the retirant's joint annuitant is more than the retirant's age,
computed to the nearest whole year, with 1/2 of that monthly amount
continued to the retirant's joint annuitant during such joint annuitant's
remaining lifetime, if any, after the death of the retirant. In the event that
the designated joint annuitant under this option predeceases the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under this option shall be adjusted automatically to the retirement benefit
which the retirant would have received if no option had been elected
under this section.

      (B) Joint and survivor. A reduced retirement benefit is payable to
the retirant during the retirant's lifetime in a monthly amount equal to
the product of (i) the monthly payment of the retirement benefit other-
wise payable under K.S.A. 74-4915 and amendments thereto and (ii) the
percentage equal to 83% minus .6% for each year by which the age of
the retirant's joint annuitant is less than the retirant's age, computed to
the nearest whole year, or plus .6% for each year by which the age of the
retirant's joint annuitant is more than the retirant's age, computed to the
nearest whole year, with that amount continued to the joint annuitant
during the joint annuitant's remaining lifetime, if any, after the death of
the retirant. In the event that the designated joint annuitant under this
option predeceases the retirant, the amount of the retirement benefit
otherwise payable to the retirant under this option shall be adjusted au-
tomatically to the retirement benefit which the retirant would have re-
ceived if no option had been elected under this section.

      (C) Joint and 3/4 to joint annuitant survivor. A reduced retirement
benefit is payable to the retirant during the retirant's lifetime in a monthly
amount equal to the product of (i) the monthly payment of the retirement
benefit otherwise payable under K.S.A. 74-4915 and amendments thereto
and (ii) the percentage equal to 87% minus .5% for each year by which
the age of the retirant's joint annuitant is less than the retirant's age,
computed to the nearest whole year, or plus .5% for each year by which
the age of the retirant's joint annuitant is more than the retirant's age,
computed to the nearest whole year, with 3/4 of that monthly amount
continued to the retirant's joint annuitant during such joint annuitant's
remaining lifetime, if any, after the death of the retirant. In the event that
the designated joint annuitant under this option predeceases the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under this option shall be adjusted automatically to the retirement benefit
which the retirant would have received if no option had been elected
under this section.

      (D) Life with 5 years certain. A reduced retirement benefit is payable
to the retirant during the retirant's lifetime in a monthly amount equal
to 98% of the monthly payment of the retirement benefit otherwise pay-
able under K.S.A. 74-4915 and amendments thereto and if the retirant
dies within the five-year certain period, measured from the commence-
ment of retirement benefit payments, such payments shall be continued
to the retirant's beneficiary during the balance of the five-year certain
period.

      (E) Life with 10 years certain. A reduced retirement benefit is pay-
able to the retirant during the retirant's lifetime in a monthly amount
equal to 95% of the monthly payment of the retirement benefit otherwise
payable under K.S.A. 74-4915 and amendments thereto and if the retirant
dies within the ten-year certain period, measured from the commence-
ment of retirement benefit payments, such payments shall be continued
to the retirant's beneficiary during the balance of the ten-year certain
period.

      (F) Life with 15 years certain. A reduced retirement benefit is pay-
able to the retirant during the retirant's lifetime in a monthly amount
equal to 88% of the monthly payment of the retirement benefit otherwise
payable under K.S.A. 74-4915 and amendments thereto and if the retirant
dies within the fifteen-year certain period, measured from the com-
mencement of retirement benefit payments, such payments shall be con-
tinued to the retirant's beneficiary during the balance of the fifteen-year
certain period.

      (G) Lump sum payment at retirement. (i) Pursuant to this option, the
member must specify a lump sum amount to be paid to the member
upon the member's retirement. The lump sum amount will be based on
the actuarial present value of the benefit as provided in K.S.A. 74-4915,
and amendments thereto. The lump sum amount designated by the mem-
ber must be in 10% increments and shall not exceed 1/2 of the actuarial
present value of the benefit provided in K.S.A. 74-4915, and amendments
thereto. If the member's spouse elects a lump sum payment as provided
in this section pursuant to the provisions of subsection (4), the lump sum
payment will be based on the present value of the retirement option se-
lected by the spouse. The lump sum amount designated by the spouse
must be in 10% increments and shall not exceed 1/2 of the actuarial present
value of the option selected in this section.

      (ii) Pursuant to this option, the member must elect to have the re-
maining actuarial present value paid in a monthly amount under the pro-
visions of K.S.A. 74-4915, and amendments thereto, or subsections (3)(A)
through (3)(F) of this section.

      (iii)  In the event that the designated joint annuitant pursuant to sub-
section (3)(A), (3)(B) or (3)(C) under this option predeceases the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under this option shall be adjusted automatically to the retirement benefit
which the retirant would have received if no option had been elected
under this section.

      (iv) The provisions of this subsection shall be effective on and after
July 1, 2001.

      (4) If a member, who is eligible to retire in accordance with the pro-
visions of K.S.A. 74-4914 and amendments thereto, dies without having
actually retired, the member's spouse, if the spouse is the sole beneficiary
for the member's accumulated contributions, may elect to receive ben-
efits under one of the options provided in this section in lieu of receiving
the member's accumulated contributions.

      (5) The benefits of subsection (4) shall be available in the case of
death within the first six months after the entry date of the member's
participating employer.

      (6) On and after January 1, 1991, if a member with 15 or more years
of credited service dies before attaining retirement age, the member's
spouse, if the spouse is the sole beneficiary for the member's accumulated
contributions, may elect to receive benefits under one of the options
provided in this section in lieu of receiving the member's accumulated
contributions. Payments under one of the options provided in this section
to the member's spouse if so elected, shall commence on the date that
the member would have attained retirement age.

      (7) Benefits payable to a joint annuitant shall accrue from the first
day of the month following the death of a member or retirant and, in the
case of the joint and 1/2 to joint annuitant survivor option, the joint and
survivor option and the joint and 3/4 to joint annuitant survivor option,
shall end on the last day of the month in which the joint annuitant dies.

      (8) The provisions of the law in effect on the retirement date of a
member under the system shall govern the retirement benefit payable to
the retirant and any joint annuitant, except, for retirement benefits pay-
able after July 1, 1993, for retirants who retired prior to July 1, 1982, in
the event that the designated joint annuitant under the option provided
in subsection (3)(A), (B) or (C), as applicable, predeceased the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under the option provided in subsection (3)(A), (B) or (C), as applicable,
shall be adjusted automatically to the retirement benefit which the retir-
ant would have received if no option had been elected under this section.

      (9) Upon the death of a joint annuitant who is receiving a retirement
benefit under the provisions of this section, there shall be paid to such
joint annuitant's beneficiary an amount equal to the excess, if any, of the
accumulated contributions of the retirant over the sum of all retirement
benefit payments made to such retirant and such joint annuitant. Such
joint annuitant shall designate a beneficiary by filing in the office of the
retirement system such designation at the time of death of the retirant.
If there is no named beneficiary of such joint annuitant living at the time
of death of such joint annuitant, any amount provided for by this section
shall be paid to, in order of preference as follows:

      (A) The joint annuitant's surviving spouse;

      (B) the joint annuitant's dependent child or children;

      (C) the joint annuitant's dependent parent or parents;

      (D) the joint annuitant's nondependent child or children;

      (E) the joint annuitant's nondependent parent or parents; or

      (F) the estate of the deceased joint annuitant.

      Sec.  5. K.S.A. 74-4920 is hereby amended to read as follows: 74-
4920. (1) (a) Upon the basis of each annual actuarial valuation and ap-
praisal as provided for in subsection (3)(a) of K.S.A. 74-4908 and amend-
ments thereto, the board shall certify, on or before July 15 of each year,
to the division of the budget in the case of the state and to the agent for
each other participating employer an actuarially determined estimate of
the rate of contribution which will be required, together with all accu-
mulated contributions and other assets of the system, to be paid by each
such participating employer to pay all liabilities which shall exist or accrue
under the system, including amortization of the actuarial accrued liability
over a period of 40 years commencing on July 1, 1993, and the actuarial
accrued liability for members of the faculty and other persons who are
employed by the state board of regents or by educational institutions
under its management assisted by the state board of regents in the pur-
chase of retirement annuities as provided in K.S.A. 74-4925 and amend-
ments thereto, as provided in this section. The actuarial accrued liability
for all participating employers other than the state board of regents re-
lating to members of the faculty and other persons described in this sec-
tion, shall be amortized by annual payments that increase 4% for each
year remaining in the amortization period. For all participating employers
other than the state board of regents relating to members of the faculty
and other persons described in this section, the projected unit credit
actuarial cost method shall be used in annual actuarial valuations, com-
mencing with the 1993 valuation, to determine the employer contribution
rates that shall be certified by the board. The actuarial accrued liability
for members of the faculty and other persons described in this subsection
assisted by the state board of regents in the purchase of retirement an-
nuities as provided in K.S.A. 74-4925 and amendments thereto shall be
amortized by annual level payments over a period of 11 years commenc-
ing July 1, 1993. Such certified rate of contribution shall be based on the
standards set forth in subsection (3)(a) of K.S.A. 74-4908 and amend-
ments thereto and shall not be based on any other purpose outside of the
needs of the system.

      (b)  (i) For employers affiliating on and after January 1, 1999, upon
the basis of an annual actuarial valuation and appraisal of the system
conducted in the manner provided for in K.S.A. 74-4908 and amend-
ments thereto, the board shall certify, on or before July 15 of each year
to each such employer an actuarially determined estimate of the rate of
contribution which shall be required to be paid by each such employer
to pay all of the liabilities which shall accrue under the system from and
after the entry date as determined by the board, upon recommendation
of the actuary. Such rate shall be termed the employer's participating
service contribution and shall be uniform for all participating employers.
Such additional liability shall be amortized over a period of 34 years com-
mencing on July 1, 1999, by annual payments that increase 4% for each
year remaining in the amortization period. For all participating employers
described in this section, the projected unit credit actuarial cost method
shall be used in annual actuarial valuations to determine the employer
contribution rates that shall be certified by the board.

      (ii) The board shall determine for each such employer separately an
amount sufficient to amortize over a period of not to exceed 34 years
commencing July 1, 1999, all liabilities for prior service costs which shall
have accrued at the time of entry into the system. On the basis of such
determination the board shall annually certify to each such employer sep-
arately an actuarially determined estimate of the rate of contribution
which shall be required to be paid by that employer to pay all of the
liabilities for such prior service costs. Such rate shall be termed the em-
ployer's prior service contribution.

      (2) The division of the budget and the governor shall include in the
budget and in the budget request for appropriations for personal services
the sum required to satisfy the state's obligation under this act as certified
by the board and shall present the same to the legislature for allowance
and appropriation.

      (3) Each other participating employer shall appropriate and pay to
the system a sum sufficient to satisfy the obligation under this act as
certified by the board.

      (4) Each participating employer is hereby authorized to pay the em-
ployer's contribution from the same fund that the compensation for which
such contribution is made is paid from or from any other funds available
to it for such purpose. Each political subdivision, other than an instru-
mentality of the state, which is by law authorized to levy taxes for other
purposes, may levy annually at the time of its levy of taxes, a tax which
may be in addition to all other taxes authorized by law for the purpose of
making its contributions under this act and, in the case of cities and coun-
ties, to pay a portion of the principal and interest on bonds issued under
the authority of K.S.A. 12-1774 and amendments thereto by cities located
in the county, which tax, together with any other fund available, shall be
sufficient to enable it to make such contribution. In lieu of levying the
tax authorized in this subsection, any taxing subdivision may pay such
costs from any employee benefits contribution fund established pursuant
to K.S.A. 12-16,102 and amendments thereto. Each participating em-
ployer which is not by law authorized to levy taxes as described above,
but which prepares a budget for its expenses for the ensuing year and
presents the same to a governing body which is authorized by law to levy
taxes as described above, may include in its budget an amount sufficient
to make its contributions under this act which may be in addition to all
other taxes authorized by law. Such governing body to which the budget
is submitted for approval, may levy a tax sufficient to allow the partici-
pating employer to make its contributions under this act, which tax, to-
gether with any other fund available, shall be sufficient to enable the
participating employer to make the contributions required by this act.

      (5) The rate of contribution certified to a participating employer as
provided in this section shall apply during the fiscal year of the partici-
pating employer which begins in the second calendar year following the
year of the actuarial valuation. For the fiscal year commencing in calendar
year 1993, the employer rate of contribution for the state of Kansas and
for participating employers under K.S.A. 74-4931 and amendments
thereto shall be 3.1% of the amount of compensation upon which mem-
bers contribute during the period. For the fiscal year commencing in
calendar year 1994, the employer rate of contribution for the state of
Kansas and for participating employers under K.S.A. 74-4931 and amend-
ments thereto shall be 3.2% of the amount of compensation upon which
members contribute during the period. For the fiscal year commencing
in calendar year 1994, the employer rate of contribution for participating
employers other than the state of Kansas shall be 2.2% of the amount of
compensation upon which members contribute during the period. Except
as specifically provided in this section, for the fiscal year commencing in
calendar year 1995, the rate of contribution certified to a participating
employer shall in no event exceed such participating employer's contri-
bution rate for the immediately preceding fiscal year by more than 0.1%
of the amount of compensation upon which members contribute during
the period. Except as specifically provided in this section, for fiscal years
commencing in calendar year 1996 and in each subsequent calendar year,
the rate of contribution certified to the state of Kansas shall in no event
exceed the state's contribution rate for the immediately preceding fiscal
year by more than 0.2% of the amount of compensation upon which
members contribute during the period. Except as specifically provided in
this subsection, for the fiscal years commencing in the following calendar
years, the rate of contribution certified to the state of Kansas shall in no
event exceed the state's contribution rate for the immediately preceding
fiscal year by more than the following amounts expressed as a percentage
of compensation upon which members contribute during the period: (a)
For the fiscal year commencing in calendar year 2005, an amount not to
exceed more than 0.4% of the amount of the immediately preceding fiscal
year; (b) for the fiscal year commencing in calendar year 2006, an amount
not to exceed more than 0.5% of the amount of the immediately preceding
fiscal year; and (c) for the fiscal year commencing in calendar year 2007
and in each subsequent calendar year, an amount not to exceed more than
0.6% of the amount of the immediately preceding fiscal years. Except as
specifically provided in this section, for fiscal years commencing in cal-
endar year 1997 and in each subsequent calendar year, the rate of con-
tribution certified to participating employers other than the state of Kan-
sas shall in no event exceed such participating employer's contribution
rate for the immediately preceding fiscal year by more than 0.15% of the
amount of compensation upon which members contribute during the
period. There shall be an employer rate of contribution certified to the
state of Kansas and participating employers under K.S.A. 74-4931 and
amendments thereto. There shall be a separate employer rate of contri-
bution certified to all other participating employers other than the state
of Kansas.

      (6) The actuarial cost of any legislation enacted in the 1994 session
of the Kansas legislature will be included in the June 30, 1994, actuarial
valuation in determining contribution rates for participating employers.

      (7) The actuarial cost of the provisions of K.S.A. 74-4950i will be
included in the June 30, 1998, actuarial valuation in determining contri-
bution rates for participating employers. The actuarial accrued liability
incurred for the provisions of K.S.A. 74-4950i shall be amortized over 15
years.

      (8) Except as otherwise provided by law, the actuarial cost of any
legislation enacted by the Kansas legislature, except the actuarial cost of
K.S.A. 74-49,114a, and amendments thereto, shall be in addition to the
employer contribution rates certified for the employer contribution rate
in the fiscal year immediately following such enactment.

      (9) Notwithstanding the provisions of subsection (8), the actuarial
cost of the provisions of K.S.A. 74-49,109 et seq. and amendments thereto
shall be first reflected in employer contribution rates effective with the
first day of the first payroll period for the fiscal year 2005. The actuarial
accrued liability incurred for the provisions of K.S.A. 74-49,109 et seq.
and amendments thereto shall be amortized over 10 years.

      (10) The board with the advice of the actuary may fix the contribution
rates for participating employers joining the system after one year from
the first entry date or for employers who exercise the option contained
in K.S.A. 74-4912 and amendments thereto at rates different from the
rate fixed for employers joining within one year of the first entry date.

      (10) (11) For employers affiliating on and after January 1, 1999, the
rates of contribution certified to the participating employer as provided
in this section shall apply during the fiscal year immediately following
such certification, but the rate of contribution during the first year fol-
lowing the employer's entry date shall be equal to 7% of the amount of
compensation on which members contribute during the year. Any amount
of such first year's contribution which may be in excess of the necessary
current service contribution shall be credited by the board to the respec-
tive employer's prior service liability.

      (11) (12) Employer contributions shall in no way be limited by any
other act which now or in the future establishes or limits the compen-
sation of any member.

      (12) (13) Notwithstanding any provision of law to the contrary, each
participating employer shall remit quarterly, or as the board may other-
wise provide, all employee deductions and required employer contribu-
tions to the executive director for credit to the Kansas public employees
retirement fund within three days after the end of the period covered by
the remittance by electronic funds transfer. Remittances of such deduc-
tions and contributions received after such date are delinquent. Delin-
quent payments due under this subsection shall be subject to interest at
the rate established for interest on judgments under subsection (a) of
K.S.A. 16-204 and amendments thereto. At the request of the board,
delinquent payments which are due or interest owed on such payments,
or both, may be deducted from any other moneys payable to such em-
ployer by any department or agency of the state.

      Sec.  6. K.S.A. 74-4925 is hereby amended to read as follows: 74-
4925. (1) The state board of regents shall:

      (a) Assist all those members of the faculty and other persons who are
employed by the state board of regents or by educational institutions
under its management and who are in the unclassified service under the
Kansas civil service act as provided in subsection (1)(f) of K.S.A. 75-2935
and amendments thereto, except health care employees, as defined by
subsection (1)(f) of K.S.A. 75-2935 and amendments thereto, in the pur-
chase of retirement annuities for their service rendered after December
31, 1961. Effective on the first day of the first payroll period commencing
with or following July 1, 1994, county extension agents employed by Kan-
sas state university under K.S.A. 2-615 and amendments thereto shall be
eligible for assistance by the state board of regents in the purchase of
retirement annuities under this section. The state board of regents shall
not assist any such person who is employed after December 31, 1961,
until such person has been employed for a waiting period of at least one
year except that (i) the state board of regents may assist any newly em-
ployed person immediately if at the time of the commencement of em-
ployment the person is covered by a valid retirement annuity contract
issued by a company described in subsection (2) which was entered into
pursuant to a retirement pension plan adopted for faculty members or
other persons, or both, employed by an institution of higher education
and to which such person or such person's employer on such person's
behalf has been making contributions for at least one year, and (ii) all
periods of employment with (A) participating employers under the Kansas
public employees retirement system, for which employment participating
service credit accrued, or (B) institutions of higher education in other
states for which employment retirement benefits accrued under a retire-
ment system or plan provided for such employment, shall be credited
toward satisfaction of such one-year waiting period if served, in either
case, during the five years immediately preceding employment with the
state board of regents or with an educational institution under its man-
agement in the unclassified service under the Kansas civil service act as
provided in subsection (1)(f) of K.S.A. 75-2935 and amendments thereto,
in addition to such employment with the state board of regents or with
an educational institution under its management; no period of employ-
ment as a student employee, as a seasonal or temporary employee or as
a part-time employee, whose employment requires less than 1,000 hours
of work per year, shall be credited toward the one-year waiting period
under subsection (1)(a); this act shall not apply to persons employed in
such temporary and part-time positions designated by the state board of
regents as exceptions hereto;

      (b) require such members of the faculty and others described in sub-
section (1)(a) who are so assisted by the state board of regents to con-
tribute an amount toward the purchase of such retirement annuities of
5.5% of their salaries, such contributions to be made through payroll
deductions and on a pretax basis;

      (c) contribute an amount toward the purchase of such retirement
annuities equal to the percentage amount, as prescribed by K.S.A. 74-
4925e and amendments thereto, of the total amount of the salaries on
which such members of the faculty and others described in subsection
(1)(a) contribute during such period for which the contribution of the
state board of regents is made;

      (d) provide, under such rules and regulations as the state board of
regents may adopt, for the retirement of any such member of the faculty
or other person described in subsection (1)(a) on account of age or con-
dition of health, retirement of such member of the faculty or other person
described in subsection (1)(a) on account of age to be not earlier than the
55th birthday and prior to January 1, 1994, not later than the end of the
academic year following the 70th year. On and after January 1, 1994, there
shall be no mandatory retirement on account of age. Any person who
retires under this section and who receives benefits from the Kansas pub-
lic employees retirement system for prior service credit shall have such
benefits calculated in accordance with the applicable provisions of K.S.A.
74-4914 and 74-4915 and amendments thereto.

      (2) For the purposes of this section the state board of regents may
contract with:

      (a) Any life insurance company authorized to do business in this state;
or

      (b) any life insurance company organized and operated without profit
to any private shareholder or individual exclusively for the purpose of
aiding and strengthening educational institutions by issuing insurance and
annuity contracts only to or for the benefit of such institution and indi-
viduals engaged in the services of such institutions, whether or not such
company is authorized to do business in Kansas. No premium tax or in-
come tax shall be due or payable on such annuity contract or contracts
for such retirement programs issued by a company described in this sub-
section (2)(b), except that neither the purchase nor the issuance of such
retirement annuities from or by a company described in this subsection
(2)(b) shall constitute the effecting of a contract of insurance.

      (3)  (a) Such member of the faculty or other person described in sub-
section (1)(a) shall also be a member of the Kansas public employees
retirement system, but only for the purpose of granting retirement ben-
efits based on prior service only which was rendered prior to January 1,
1962, which shall be credited to the member as provided in subsection
(1) of K.S.A. 74-4913 and amendments thereto, except that such member
of the faculty or other person described in subsection (1)(a) who was
employed prior to July 1, 1962, who has not yet retired and who is em-
ployed on July 1, 1988, on an academic year contract, shall receive credit
for 12 months of prior service for each nine months of prior service for
which such member or person was employed on an academic year con-
tract prior to July 1, 1962. For the purpose of determining eligibility for
a vested benefit, service by such a member of the faculty or other person
after December 31, 1961, shall be construed to be credited service under
subsection (2) of K.S.A. 74-4917 and amendments thereto.

      (b) Any member of the faculty or other person described in subsec-
tion (1)(a) who retires after 10 years of continuous service immediately
preceding retirement shall be granted a retirement benefit based on prior
service only which was rendered prior to January 1, 1962. Application for
such benefit shall be in such form and manner as the board shall pre-
scribe.

      (4) For the purpose of establishing a procedure whereby the state
board of regents and any member of the faculty or other person described
in subsection (1)(a), subject to rules and regulations of the state board of
regents, may take advantage of section 403(a) or (b) of the federal internal
revenue code of 1986 or any other section of the federal internal revenue
code of 1986 which defers or excludes amounts from inclusion in income,
any member of the faculty or any other person described in subsection
(1)(a), whether or not such person has satisfied the one-year waiting pe-
riod requirement under subsection (1)(a), may request in writing that the
state board of regents reduce such person's annual salary, as fixed by the
board, in an amount equal to not less than 5% nor more than the per-
centage allowed under section 403(b) of the federal internal revenue code
of 1986, as designated by such member of the faculty or other person
described in subsection (1)(a), of the gross amount of such annual salary.
In the event of such request by a faculty member or other person who is
required to make the contribution as provided in subsection (1)(b), such
person shall not be required to make such contribution and the state
board of regents shall provide a sum equal to the percentage amount, as
prescribed by K.S.A. 74-4925e and amendments thereto, of the gross
annual salary of the member of the faculty or other person and shall
purchase for and on behalf of each such person whose salary has been so
reduced a retirement annuity contract or contracts, the annual premiums
for which shall be equal to the sum of the amount of the salary reduction
of the member of the faculty or other person and the amount paid by the
state board of regents. In the event of such request by a faculty member
or other person who is serving the one-year waiting period pursuant to
subsection (1)(a) who is not required to make the contribution as provided
in subsection (1)(b), the state board of regents shall purchase for and on
behalf of each such person whose salary has been so reduced a retirement
annuity contract or contracts, the annual premiums for which shall be
equal to the sum of the amount of the salary reduction of the member
of the faculty or other person, but the state board of regents shall not
provide the sum equal to the percentage amount, as prescribed by K.S.A.
74-4925e and amendments thereto, of the gross annual salary of such
person as provided for such person who is required to make the contri-
bution as provided in subsection (1)(b). Such retirement annuity contracts
may be purchased by the state board of regents from companies described
in subsection (2)(a) and subsection (2)(b) or from noninsurance compa-
nies who offer retirement plans that meet the requirements of section
403(b) of the federal internal revenue code of 1986, except that the state
board of regents may require that the first 5% of the gross amount of
such person's annual salary which is reduced under this subsection (4)
and the amount equal to the percentage amount, as prescribed by K.S.A.
74-4925e and amendments thereto, of the gross amount of such person's
annual salary which is provided by the state board of regents for the
purchase of retirement annuity contracts under this subsection (4), if
required to be provided under this subsection (4), shall be used to pur-
chase such retirement annuity contracts from such company or companies
as may be designated by the state board of regents for such purposes.
The director of accounts and reports is authorized to draw warrants on
the state treasurer upon the filing with the director of proper vouchers
for the amount of the premium on the retirement annuity contract to be
paid pursuant to the terms of such contracts and this act.

      (5) All employees who are described in subsection (1)(a) and who
commence such employment on and after July 1, 1976, shall receive as-
sistance under subsection (1) and shall be covered by a valid retirement
annuity contract issued by a company described in subsection (2).

      (6) Any employee of the state board of regents or of an educational
institution under its management, other than an elected official, who is
receiving or is eligible for assistance by the state board of regents in the
purchase of a retirement annuity under this section and who becomes
ineligible for such assistance because such employee's position is reclas-
sified to a position in the classified service under the Kansas civil service
act or who becomes ineligible for such assistance because such employee
transfers to a position in the classified service under the Kansas civil serv-
ice act with the state board of regents or an educational institution under
its management, shall become a member of the Kansas public employees
retirement system in accordance with the provisions of subsection (5) of
K.S.A. 74-4911 and amendments thereto, unless such employee files a
written election in the office of the Kansas public employees retirement
system, in the form and manner prescribed by the board of trustees
thereof, to remain eligible for assistance by the state board of regents
under this section prior to the first day of the first complete payroll period
occurring after the effective date of such reclassification or transfer. Fail-
ure to file such written election shall be presumed to be an election not
to remain eligible for assistance by the state board of regents under this
section and to become a member of the Kansas public employees retire-
ment system under subsection (5) of K.S.A. 74-4911 and amendments
thereto. Such election, whether to remain eligible for such assistance or
to become a member of such system, shall be effective as of the effective
date of such reclassification or transfer and shall be irrevocable.

      (7) The state board of regents shall adopt uniform policies applicable
to members of the faculty and other persons, who are employed by the
state board of regents or by any educational institution under its man-
agement and who are in the unclassified service under the Kansas civil
service act as provided in subsection (1)(f) of K.S.A. 75-2935 and amend-
ments thereto, except health care employees, as defined by subsection
(1)(f) of K.S.A. 75-2935 and amendments thereto, for the purposes of
administering the provisions of this section and the provision of retire-
ment annuities and other benefits hereunder. All assistance provided by
the state board of regents for such persons, and agreements entered into
therefor, pursuant to this section prior to the effective date are hereby
authorized, confirmed and validated.

      (8) Any employee described in subsection (1)(a) who is on leave of
absence and who accepts a position in the executive branch of govern-
ment may file a written election in the office of the Kansas public em-
ployees retirement system, in the form and manner prescribed by the
board, to remain eligible for assistance by the state board of regents under
this section prior to the first day of the first complete payroll period
occurring after the commencement of such service in the executive
branch of government. Failure to file such written election shall be pre-
sumed to be an election not to remain eligible for assistance by the state
board of regents. The state board of regents shall contribute an amount
toward the purchase of retirement annuities on behalf of such employee
equal to the sum of the amounts provided in subsection (1)(c).

      (9) Any employee described in subsection (1)(a) who is on leave of
absence and who is elected or appointed as a member of the legislature
may file a written election in the office of the Kansas public employees
retirement system state board of regents, in the form and manner pre-
scribed by the board, to remain eligible for assistance by the state board
of regents under this section prior to the first day of the first complete
payroll period occurring after the commencement of such service in the
legislature or for any employee who is a member of the legislature on
January 8, 2001, prior to the first day of the first complete payroll period
occurring after July 1, 2001. Failure to file such written election shall be
presumed to be an election not to remain eligible for assistance by the
state board of regents. For any employee who files an election as provided
in this subsection and who was a member of the legislature on January
8, 2001, such election shall be effective on January 8, 2001. The state
board of regents shall contribute an amount toward the purchase of re-
tirement annuities on behalf of such employee equal to the percentage
amount, as prescribed by K.S.A. 74-4925e, and amendments thereto, on
the biweekly rate of the salary of such employee with the state board of
regents in effect on the date preceding such leave of absence and contin-
uing throughout such leave of absence. Any such employee who makes
an election as provided by this subsection shall be eligible for the insured
death benefit and insured disability benefit in the same manner as pro-
vided under the provisions of K.S.A. 74-4927a, and amendments thereto.
The provisions of this section are intended to further the public policy of
encouraging persons to serve in elective office.

      (10) Any employee who filed a written election under subsection (9)
prior to July 1, 2001, and who is a member of the legislature after January
14, 2002, may file a written election in the office of the state board of
regents, in a form and manner prescribed by the board, to be eligible for
an amount to be contributed for any periods prior to January 8, 2001,
that an employee was on leave of absence and who was elected or ap-
pointed as a member of the legislature. The board of regents shall submit
a request to the director of legislative administrative services to calculate
an amount to be contributed toward the purchase of the employee's re-
tirement annuities and to include in the request a certification of the dates
for leaves of absence taken by the employee prior to January 8, 2001, for
the purpose of serving in the legislature during regular sessions. The
amount shall be calculated by the director of legislative administrative
services for periods during which the legislature was in regular session,
first by annualizing the compensation and expenses allowance under sub-
sections (a) and (b) of K.S.A. 46-137a and amendments thereto paid to
any such legislator during those periods; and second, by applying the
annual interest earnings assumed by the board of trustees of the Kansas
public employees retirement system for the purpose of anticipating ac-
tuarial gains on investments for the same time periods. The amount cal-
culated by the director of legislative administrative services shall be sub-
mitted to the board of regents. The board of regents shall contribute such
amount submitted toward the purchase of retirement annuities on behalf
of such employee.

      Sec.  7. K.S.A. 74-4911f is hereby amended to read as follows: 74-
4911f. (a) Subject to procedures or limitations prescribed by the governor,
any person who is not an employee and who becomes a state officer may
elect to not become a member of the system. The election to not become
a member of the system must be filed within 90 days of assuming the
position of state officer. Such election shall be irrevocable. If such election
is not filed by such state officer, such state officer shall be a member of
the system.

      (b) Any such state officer who is a member of the Kansas public
employees retirement system, on or after the effective date of this act,
may elect to not be a member by filing an election with the office of the
retirement system. The election to not become a member of the system
must be filed within 90 days of assuming the position of state officer. If
such election is not filed by such state officer, such state officer shall be
a member of the system.

      (c) Subject to limitations prescribed by the secretary of administra-
tion, the state agency employing any employee who has filed an election
as provided under subsection (a) or (b) and who has entered into an
employee participation agreement, as provided in K.S.A. 75-5524 and
amendments thereto for deferred compensation pursuant to the Kansas
public employees deferred compensation plan shall contribute to such
plan on such employee's behalf an amount equal to 8% of the employee's
salary, as such salary has been approved pursuant to K.S.A. 75-2935b and
amendments thereto or as otherwise prescribed by law. With regard to a
state officer who is a member of the legislature who has retired pursuant
to the Kansas public employees retirement system and who files an elec-
tion as provided in this section, employee's salary means per diem com-
pensation as provided by law as a member of the legislature.

      (d) As used in this section and K.S.A. 74-4927k and amendments
thereto, ``state officer'' means the secretary of administration, secretary
on aging, secretary of commerce and housing, secretary of corrections,
secretary of health and environment, secretary of human resources, sec-
retary of revenue, secretary of social and rehabilitation services, secretary
of transportation, secretary of wildlife and parks, superintendent of the
Kansas highway patrol, secretary of agriculture, executive director of the
Kansas lottery, executive director of the Kansas racing commission, pres-
ident of the Kansas development finance authority, state fire marshal,
state librarian, securities commissioner, adjutant general, members of the
state board of tax appeals, members of the Kansas parole board, members
of the state corporation commission, any unclassified employee on the
staff of officers of both houses of the legislature, any unclassified em-
ployee appointed to the governor's or lieutenant governor's staff and, any
person employed by the legislative branch of the state of Kansas, other
than any such person receiving service credited under the Kansas public
employees retirement system or any other retirement system of the state
of Kansas therefor, who elected to be covered by the provisions of this
section as provided in subsection (e) of K.S.A. 46-1302 and amendments
thereto or who is first employed on or after July 1, 1996, by the legislative
branch of the state of Kansas and any member of the legislature who has
retired pursuant to the Kansas public employees retirement system.

      (e) The provisions of this section shall not apply to any state officer
who has elected to remain eligible for assistance by the state board of
regents as provided in subsection (a) of K.S.A. 74-4925 and amendments
thereto.

      Sec.  8. K.S.A. 74-4927 is hereby amended to read as follows: 74-
4927. (1) The board may establish a plan of death and long-term disability
benefits to be paid to the members of the retirement system as provided
by this section. The long-term disability benefit shall not be payable until
the member has been prevented from carrying out each and every duty
pertaining to the member's employment as a result of sickness or injury
for a period of 180 days and the annual benefit shall not exceed an amount
equal to 66 2/3% of the member's annual rate of compensation on the
date such disability commenced and shall be payable in equal monthly
installments. In the event that a member's compensation is not fixed at
an annual rate but on an hourly, weekly, biweekly, monthly or any other
basis than annual, the board shall prescribe by rule and regulation a for-
mula for establishing a reasonable rate of annual compensation to be used
in determining the amount of the death or long-term disability benefit
for such member. Such plan shall provide that:

      (A) For deaths occurring prior to January 1, 1987, the right to receive
such death benefit shall cease upon the member's attainment of age 70
or date of retirement whichever first occurs. The right to receive such
long-term disability benefit shall cease (i) for a member who becomes
eligible for such benefit before attaining age 60, upon the date that such
member attains age 65 or the date of such member's retirement, which-
ever first occurs, (ii) for a member who becomes eligible for such benefit
at or after attaining age 60, the date that such member has received such
benefit for a period of five years, upon the date that such member attains
age 70, or upon the date of such member's retirement, whichever first
occurs, (iii) for all disabilities incurred on or after January 1, 1987, for a
member who becomes eligible for such benefit at or after attaining age
70, the date that such member has received such benefit for a period of
12 months or upon the date of such member's retirement, whichever first
occurs, and (iv) for all disabilities incurred on or after January 1, 1987,
for a member who becomes eligible for such benefit at or after attaining
age 75, the date that such member has received such benefit for a period
of six months or upon the date of such member's retirement, whichever
first occurs.

      (B) Long-term disability benefit payments shall be in lieu of any ac-
cidental total disability benefit that a member may be eligible to receive
under subsection (3) of K.S.A. 74-4916 and amendments thereto. The
member must make an initial application for social security disability ben-
efits and, if denied such benefits, the member must pursue and exhaust
all administrative remedies of the social security administration which
include, but are not limited to, reconsideration and hearings. Such plan
may provide that any amount which a member receives as a social security
benefit or a disability benefit or compensation from any source by reason
of any employment including, but not limited to, workers compensation
benefits may be deducted from the amount of long-term disability benefit
payments under such plan. During the period in which such member is
pursuing such administrative remedies prior to a final decision of the
social security administration, social security disability benefits may be
estimated and may be deducted from the amount of long-term disability
benefit payments under such plan. Such long-term disability payments
shall accrue from the later of the 181st day of total disability or the first
day upon which the member ceases to draw compensation from the em-
ployer. If the social security benefit, workers compensation benefit, other
income or wages or other disability benefit by reason of employment, or
any part thereof, is paid in a lump-sum, the amount of the reduction shall
be calculated on a monthly basis over the period of time for which the
lump-sum is given. In no case shall a member who is entitled to receive
long-term disability benefits receive less than $50 per month. As used in
this section, ``workers compensation benefits'' means the total award of
disability benefit payments under the workers compensation act notwith-
standing any payment of attorney fees from such benefits as provided in
the workers compensation act.

      (C) The plan may include other provisions relating to qualifications
for benefits; schedules and graduation of benefits; limitations of eligibility
for benefits by reason of termination of employment or membership;
conversion privileges; limitations of eligibility for benefits by reason of
leaves of absence, military service or other interruptions in service; lim-
itations on the condition of long-term disability benefit payment by reason
of improved health; requirements for medical examinations or reports; or
any other reasonable provisions as established by rule and regulation of
uniform application adopted by the board.

      (D) On and after April 30, 1981, the board may provide under the
plan for the continuation of long-term disability benefit payments to any
former member who forfeits the entitlement to continued service credit
under the retirement system or continued assistance in the purchase of
retirement annuities under K.S.A. 74-4925 and amendments thereto and
to continued long-term disability benefit payments and continued death
benefit coverage, by reason of the member's withdrawal of contributions
from the retirement system or the repurchase of retirement annuities
which were purchased with assistance received under K.S.A. 74-4925 and
amendments thereto. Such long-term disability benefit payments may be
continued until such individual dies, attains age 65 or is no longer disa-
bled, whichever occurs first.

      (E) Any visually impaired person who is in training at and employed
by a sheltered workshop for the blind operated by the secretary of social
and rehabilitation services and who would otherwise be eligible for the
long-term disability benefit as described in this section shall not be eli-
gible to receive such benefit due to visual impairment as such impairment
shall be determined to be a preexisting condition.

      (2)  (A) In the event that a member becomes eligible for a long-term
disability benefit under the plan authorized by this section such member
shall be given participating service credit for the entire period of such
disability. Such member's final average salary shall be computed in ac-
cordance with subsection (17) of K.S.A. 74-4902 and amendments thereto
except that the years of participating service used in such computation
shall be the years of salaried participating service.

      (B) In the event that a member eligible for a long-term disability
benefit under the plan authorized by this section shall be disabled for a
period of five years or more immediately preceding retirement, such
member's final average salary shall be adjusted upon retirement by the
actuarial salary assumption rates in existence during such period of dis-
ability. Effective July 1, 1993, such member's final average salary shall be
adjusted upon retirement by 5% for each year of disability after July 1,
1993, but before July 1, 1998. Effective July 1, 1998, such member's final
average salary shall be adjusted upon retirement by an amount equal to
the lesser of: (i) The percentage increase in the consumer price index for
all urban consumers as published by the bureau of labor statistics of the
United States department of labor minus 1%; or (ii) four percent per
annum, measured from the member's last day on the payroll to the month
that is two months prior to the month of retirement, for each year of
disability after July 1, 1998.

      (C) In the event that a member eligible for a long-term disability
benefit under the plan authorized by this section shall be disabled for a
period of five years or more immediately preceding death, such member's
current annual rate shall be adjusted by the actuarial salary assumption
rates in existence during such period of disability. Effective July 1, 1993,
such member's current annual rate shall be adjusted upon death by 5%
for each year of disability after July 1, 1993, but before July 1, 1998.
Effective July 1, 1998, such member's current annual rate shall be ad-
justed upon death by an amount equal to the lesser of: (i) The percentage
increase in the consumer price index for all urban consumers published
by the bureau of labor statistics of the United States department of labor
minus 1%; or (ii) four percent per annum, measured from the member's
last day on the payroll to the month that is two months prior to the month
of death, for each year of disability after July 1, 1998.

      (3)  (A) To carry out the legislative intent to provide, within the funds
made available therefor, the broadest possible coverage for members who
are in active employment or involuntarily absent from such active em-
ployment, the plan of death and long-term disability benefits shall be
subject to adjustment from time to time by the board within the limita-
tions of this section. The plan may include terms and provisions which
are consistent with the terms and provisions of group life and long-term
disability policies usually issued to those employers who employ a large
number of employees. The board shall have the authority to establish and
adjust from time to time the procedures for financing and administering
the plan of death and long-term disability benefits authorized by this
section. Either the insured death benefit or the insured disability benefit
or both such benefits may be financed directly by the system or by one
or more insurance companies authorized and licensed to transact group
life and group accident and health insurance in this state.

      (B) The board may contract with one or more insurance companies,
which are authorized and licensed to transact group life and group acci-
dent and health insurance in Kansas, to underwrite or to administer or
to both underwrite and administer either the insured death benefit or the
long-term disability benefit or both such benefits. Each such contract with
an insurance company under this subsection shall be entered into on the
basis of competitive bids solicited and administered by the board. Such
competitive bids shall be based on specifications prepared by the board.

      (i) In the event the board purchases one or more policies of group
insurance from such company or companies to provide either the insured
death benefit or the long-term disability benefit or both such benefits,
the board shall have the authority to subsequently cancel one or more of
such policies and, notwithstanding any other provision of law, to release
each company which issued any such canceled policy from any liability
for future benefits under any such policy and to have the reserves estab-
lished by such company under any such canceled policy returned to the
system for deposit in the group insurance reserve of the fund.

      (ii) In addition, the board shall have the authority to cancel any policy
or policies of group life and long-term disability insurance in existence
on the effective date of this act and, notwithstanding any other provision
of law, to release each company which issued any such canceled policy
from any liability for future benefits under any such policy and to have
the reserves established by such company under any such canceled policy
returned to the system for deposit in the group insurance reserve of the
fund. Notwithstanding any other provision of law, no premium tax shall
be due or payable by any such company or companies on any such policy
or policies purchased by the board nor shall any brokerage fees or com-
missions be paid thereon.

      (4)  (A) There is hereby created in the state treasury the group in-
surance reserve fund. Investment income of the fund shall be added or
credited to the fund as provided by law. The cost of the plan of death
and long-term disability benefits shall be paid from the group insurance
reserve fund, which shall be administered by the board. Except as oth-
erwise provided by this subsection, each participating employer shall ap-
propriate and pay to the system in such manner as the board shall pre-
scribe in addition to the employee and employer retirement contributions
an amount equal to .6% of the amount of compensation on which the
members' contributions to the Kansas public employees retirement sys-
tem are based for deposit in the group insurance reserve fund. Notwith-
standing the provisions of this subsection, no participating employer shall
appropriate and pay to the system any amount provided for by this sub-
section for deposit in the group insurance reserve fund for the period
commencing on April 1, 2000, and ending on December 31, 2001, or for
the period commencing July 1, 2002, and ending December 31, 2002, or
for the period commencing April 1, 2003, and ending on June 30, 2004.

      (B) The director of the budget and the governor shall include in the
budget and in the budget request for appropriations for personal services
a sum to pay the state's contribution to the group insurance reserve fund
as provided by this section and shall present the same to the legislature
for allowances and appropriation.

      (C) The provisions of subsection (4) of K.S.A. 74-4920 and amend-
ments thereto shall apply for the purpose of providing the funds to make
the contributions to be deposited to the group insurance reserve fund.

      (D) Any dividend or retrospective rate credit allowed by an insurance
company or companies shall be credited to the group insurance reserve
fund and the board may take such amounts into consideration in deter-
mining the amounts of the benefits under the plan authorized by this
section.

      (5) The death benefit provided under the plan of death and long-
term disability benefits authorized by this section shall be known and
referred to as insured death benefit. The long-term disability benefit pro-
vided under the plan of death and long-term disability benefits authorized
by this section shall be known and referred to as long-term disability
benefit.

      (6) The board is hereby authorized to establish an optional death
benefit plan. Except as provided in subsection (7), such optional death
benefit plan shall be made available to all employees who are covered or
may hereafter become covered by the plan of death and long-term disa-
bility benefits authorized by this section. The cost of the optional death
benefit plan shall be paid by the applicant either by means of a system
of payroll deductions or direct payment to the board. The board shall
have the authority and discretion to establish such terms, conditions, spec-
ifications and coverages as it may deem to be in the best interest of the
state of Kansas and its employees which should include term death ben-
efits for the person's period of active state employment regardless of age,
but in no case, on and after January 1, 1989, shall the maximum allowable
coverage be less than $200,000. The cost of the optional death benefit
plan shall not be established on such a basis as to unreasonably discrim-
inate against any particular age group. The board shall have full admin-
istrative responsibility, discretion and authority to establish and continue
such optional death benefit plan and the director of accounts and reports
of the department of administration shall when requested by the board
and from funds appropriated or available for such purpose establish a
system to make periodic deductions from state payrolls to cover the cost
of the optional death benefit plan coverage under the provisions of this
subsection (6) and shall remit all deductions together with appropriate
accounting reports to the system. There is hereby created in the state
treasury the optional death benefit plan reserve fund. Investment income
of the fund shall be added or credited to the fund as provided by law. All
funds received by the board, whether in the form of direct payments,
payroll deductions or otherwise, shall be accounted for separately from
all other funds of the retirement system and shall be paid into the optional
death benefit plan reserve fund, from which the board is authorized to
make the appropriate payments and to pay the ongoing costs of admin-
istration of such optional death benefit plan as may be incurred in carrying
out the provisions of this subsection (6).

      (7) Any employer other than the state of Kansas which is currently a
participating employer of the Kansas public employees retirement system
or is in the process of affiliating with the Kansas public employees retire-
ment system may also elect to affiliate for the purposes of subsection (6).
All such employers shall make application for affiliation with such system,
to be effective on January 1 next following application. Such optional
death benefit plan shall not be available for employees of employers spec-
ified under this subsection until after July 1, 1988.

      Sec.  9. K.S.A. 74-4927f is hereby amended to read as follows: 74-
4927f. (a) For the purposes of providing the ``insured death benefit'' as
prescribed in K.S.A. 74-4927 and amendments thereto, to all persons who
are members of the retirement system for judges, the term ``member'' as
used in K.S.A. 74-4927 and amendments thereto, and as used in this
section shall include members of the retirement system for judges.

      (b) Except as otherwise provided by this subsection, the employer of
any member who is a member of the retirement system for judges shall
pay to the Kansas public employees retirement system in such manner as
the board of trustees shall prescribe, an amount equal to .4% of the
amount of compensation on which the member's contributions to the
retirement system for judges are based for deposit in the group insurance
reserve of the Kansas public employees retirement fund, in lieu of the
amount required to be paid under subsection (4) of K.S.A. 74-4927 and
amendments thereto. Notwithstanding the provisions of this subsection,
no employer shall pay to the system any amount provided for by this
subsection for deposit in the group insurance reserve fund for the period
commencing on April l, 2000, and ending on December 31, 2001, or for
the period commencing July 1, 2002, and ending on December 31, 2002,
or for the period commencing on April 1, 2003, and ending on June 30,
2004.

      Sec.  10. K.S.A. 74-4927k is hereby amended to read as follows: 74-
4927k. (a) For the purposes of providing the ``insured death benefit'' and
``long-term disability benefit'' as prescribed in K.S.A. 74-4927 and amend-
ments thereto and of providing the ``accidental death benefit'' as pre-
scribed in subsection (2) of K.S.A. 74-4916 and amendments thereto, to
all state officers who have filed an election as provided in subsection (a)
or (b) of K.S.A. 74-4911f, and amendments thereto, the term ``member''
as used in K.S.A. 74-4927 and amendments thereto and subsection (2) of
K.S.A. 74-4916 and amendments thereto and as used in this section shall
include such state officers.

      (b) The state agency employing any member shall pay to the Kansas
public employees retirement system in such manner as the board of trus-
tees shall prescribe, an amount sufficient to pay the employer's contri-
bution to the group insurance reserve as provided in subsection (4) of
K.S.A. 74-4927 and amendments thereto.

      (c) The state agency employing any member shall maintain a file of
the beneficiaries named by the persons covered under this section in the
form and manner as prescribed by the board of trustees of the Kansas
public employees retirement system.

      (d) Notwithstanding any provision of law to the contrary, the provi-
sions of this section shall not apply to any person employed by the leg-
islative branch of the state of Kansas who elected to be covered by the
provisions of K.S.A. 74-4911f, and amendments thereto, as provided in
subsection (e) of K.S.A. 46-1302, and amendments thereto, or who is first
employed on or after July 1, 1996, by the legislative branch of the state
of Kansas as described in K.S.A. 46-1302, and amendments thereto.

      (e) Notwithstanding any provision of law to the contrary, the provi-
sions of this section shall not apply to any member of the legislature who
has retired pursuant to the Kansas public employees retirement system
and who elected to be covered by the provisions of K.S.A. 74-4911f and
amendments thereto.

      Sec.  11. K.S.A. 74-4963 is hereby amended to read as follows: 74-
4963. (1) Upon termination of employment prior to the completion of 20
years of credited service, after 30 days after such termination a member
may withdraw such member's accumulated contributions or elect to leave
such accumulated contributions on deposit with the system. If the mem-
ber elects to leave the accumulated contributions on deposit with the
system and if the member returns to employment with the same or an-
other participating employer within five years, such member shall receive
credit for such member's service prior to such termination. If the member
does not elect to leave the accumulated contributions on deposit or if the
member does not return to covered employment within five years, such
member shall no longer be a member of the system and the sum of such
member's accumulated contributions then on deposit with this system
shall be paid to such member after making application in a form pre-
scribed by the board and after the system has a reasonable time to process
the application for withdrawal. Upon proper notification by the system,
member contributions not on deposit with the system shall be paid to the
member by the participating employer.

      (2) If, after termination and withdrawal of accumulated contribu-
tions, a former member returns to covered employment, except as oth-
erwise provided in subsection (1), the former member shall become a
member of the system as provided in subsection (2) of K.S.A. 74-4955
and amendments thereto. Any former member returning to covered em-
ployment may, at the former member's option, purchase service credit
for such previously forfeited service credit, subject to the provisions of
K.S.A. 74-49,123, and amendments thereto, at an additional rate of con-
tribution, in addition to the employee's rate of contribution as provided
in K.S.A. 74-4919 74-4965, and amendments thereto, based upon the
member's attained age at the time of purchase and using actuarial as-
sumptions and tables in use by the retirement system at such time of
purchase for such periods of service. Such additional rate of contribution
shall commence at the beginning of the quarter following such election
and shall remain in effect until all quarters of such service have been
purchased. Subject to the provisions of K.S.A. 74-49,123, and amend-
ments thereto, such member may elect to effect such purchase by means
of a single lump-sum payment in lieu of the increased amount of the
employee's contribution rate otherwise provided for in this act in an
amount equal to the then present value of the benefits being purchased
determined by the actuary using the member's attained age, annual com-
pensation at the time of purchase and the actuarial assumptions and tables
then in use by the retirement system. The lump-sum payment shall be
made immediately upon being notified of the amount due. Upon receipt
of such payment by the system the member shall receive full credit for
the number of previously forfeited quarters of participating service which
the member has elected to repurchase. Any member who repurchases all
of the member's previously forfeited participating service credit shall also
receive all of the member's previously forfeited prior service credit.

      (3) Upon termination and withdrawal of accumulated contributions,
any member whose employment was, up to the member's employer's
entry date, covered by a pension system established under the provisions
of K.S.A. 13-14a01 through 13-14a14, and amendments thereto, or K.S.A.
14-10a01 through 14-10a15, and amendments thereto, shall be entitled
to receive from the member's employer the sum of the member's accu-
mulated contributions to the previous pension system.

      (4) If a member has completed 20 years of credited service at date
of termination, the member shall be granted automatically a vested re-
tirement benefit in the system, but any time prior to the commencement
of retirement benefit payments and before attaining age 55 the member
may withdraw the member's accumulated contributions, whereupon the
member's membership in this system ceases and no other amounts shall
be payable for the member's prior and participating service credit. Eli-
gibility of such member, who has not withdrawn the member's accumu-
lated contributions, for retirement benefits and procedures for making
application for retirement benefits shall be in accordance with K.S.A. 74-
4957 and amendments thereto, except that in lieu of the three-month
notice of intention to retire being made to the employer, such member
shall make application for retirement in a form prescribed by the board
and retirement benefits shall accrue from the first day of the month fol-
lowing receipt of such application. The amount of the retirement benefit
shall be determined as provided in K.S.A. 74-4958 and amendments
thereto.

      (5) If a member, who has a vested retirement benefit, again becomes
an employee of a participating employer, the amount of the member's
vested retirement benefit shall remain in effect, and any retirement ben-
efit such member subsequently accrues shall be calculated separately
based on credited service after again becoming an employee and shall be
added to that which had been vested by virtue of previous service. Eli-
gibility of such member for retirement benefits and procedures for mak-
ing application for retirement benefits shall be in accordance with K.S.A.
74-4957 and amendments thereto.

      (6) Any member of this system who was previously a member of the
Kansas public employees retirement system or the retirement system for
judges and who forfeited service credit under either of those systems by
reason of termination of employment and withdrawal of their contribu-
tions to that system, may elect, subject to the provisions of K.S.A. 74-
49,123 and amendments thereto, to purchase service credit for the pre-
viously forfeited service credit by means of a single lump-sum payment
and such service shall be recredited to that system. The amount of the
lump-sum payment shall be determined by the actuary using the mem-
ber's then current annual rate of compensation and the actuarial assump-
tions and tables then currently in use by that retirement system.

      (7) The provisions of this section shall apply only to members who
were appointed or employed prior to July 1, 1989, and who did not make
an election pursuant to K.S.A. 74-4955a and amendments thereto.

      Sec.  12. K.S.A. 74-4963a is hereby amended to read as follows: 74-
4963a. (1) Upon termination of employment prior to the completion of
15 years of credited service, after 30 days after such termination a mem-
ber may withdraw such member's accumulated contributions or elect to
leave such accumulated contributions on deposit with the system. If the
member elects to leave the accumulated contributions on deposit with
the system and if the member returns to employment with the same or
another participating employer within five years, such member shall re-
ceive credit for such member's service prior to such termination. If the
member does not elect to leave the accumulated contributions on deposit
or if the member does not return to covered employment within five
years, such member shall no longer be a member of the system and the
sum of such member's accumulated contributions then on deposit with
this system shall be paid to such member after making application in a
form prescribed by the board and after the system has a reasonable time
to process the application for withdrawal. Upon proper notification by
the system, member contributions not on deposit with the system shall
be paid to the member by the participating employer.

      (2) If, after termination and withdrawal of accumulated contribu-
tions, a former member returns to covered employment, except as oth-
erwise provided in subsection (1), the former member shall become a
member of the system as provided in subsection (2) of K.S.A. 74-4955
and amendments thereto. Any former member returning to covered em-
ployment may, at the former member's option, purchase service credit
for such previously forfeited service credit, subject to the provisions of
K.S.A. 74-49,123, and amendments thereto, at an additional rate of con-
tribution, in addition to the employee's rate of contribution as provided
in K.S.A. 74-4919 74-4965, and amendments thereto, based upon the
member's attained age at the time of purchase and using actuarial as-
sumptions and tables in use by the retirement system at such time of
purchase for such periods of service. Such additional rate of contribution
shall commence at the beginning of the quarter following such election
and shall remain in effect until all quarters of such service have been
purchased. Subject to the provisions of K.S.A. 74-49,123, and amend-
ments thereto, such member may elect to effect such purchase by means
of a single lump-sum payment in lieu of the increased amount of the
employee's contribution rate otherwise provided for in this act in an
amount equal to the then present value of the benefits being purchased
determined by the actuary using the member's attained age, annual com-
pensation at the time of purchase and the actuarial assumptions and tables
then in use by the retirement system. The lump-sum payment shall be
made immediately upon being notified of the amount due. Upon receipt
of such payment by the system the member shall receive full credit for
the number of previously forfeited quarters of participating service which
the member has elected to repurchase. Any member who repurchases all
of the member's previously forfeited participating service credit shall also
receive all of the member's previously forfeited prior service credit.

      (3) Upon termination and withdrawal of accumulated contributions,
any member whose employment was, up to the member's employer's
entry date, covered by a pension system established under the provisions
of K.S.A. 13-14a01 through 13-14a14, and amendments thereto, or K.S.A.
14-10a01 through 14-10a15, and amendments thereto, shall be entitled
to receive from the member's employer the sum of the member's accu-
mulated contributions to the previous pension system.

      (4) If a member has completed 15 years of credited service at date
of termination, the member shall be granted automatically a vested re-
tirement benefit in the system, but any time prior to the commencement
of retirement benefit payments and before attaining age 55 the member
may withdraw the member's accumulated contributions, whereupon the
member's membership in this system ceases and no other amounts shall
be payable for the member's prior and participating service credit. Eli-
gibility of such member, who has not withdrawn the member's accumu-
lated contributions, for retirement benefits and procedures for making
application for retirement benefits shall be in accordance with K.S.A. 74-
4957 and amendments thereto, except that in lieu of the three-month
notice of intention to retire being made to the employer, such member
shall make application for retirement in a form prescribed by the board
and retirement benefits shall accrue from the first day of the month fol-
lowing receipt of such application. The amount of the retirement benefit
shall be determined as provided in K.S.A. 74-4958 and amendments
thereto.

      (5) If a member, who has a vested retirement benefit, again becomes
an employee of a participating employer, the amount of the member's
vested retirement benefit shall remain in effect, and any retirement ben-
efit such member subsequently accrues shall be calculated separately
based on credited service after again becoming an employee and shall be
added to that which had been vested by virtue of previous service. Eli-
gibility of such member for retirement benefits and procedures for mak-
ing application for retirement benefits shall be in accordance with K.S.A.
74-4957 and amendments thereto.

      (6) Any member of this system who was previously a member of the
Kansas public employees retirement system or the retirement system for
judges and who forfeited service credit under either of those systems by
reason of termination of employment and withdrawal of their contribu-
tions to that system, may elect, subject to the provisions of K.S.A. 74-
49,123 and amendments thereto, to purchase service credit for the pre-
viously forfeited service credit by means of a single lump-sum payment
and such service shall be recredited to that system. The amount of the
lump-sum payment shall be determined by the actuary using the mem-
ber's then current annual rate of compensation and the actuarial assump-
tions and tables then currently in use by that retirement system.

      (7) The provisions of this section shall be effective on and after July
1, 1989 and shall apply only to members who were appointed or employed
prior to July 1, 1989, and who made an election pursuant to K.S.A. 74-
4955a and amendments thereto; and persons appointed or employed on
or after July 1, 1989.

      Sec.  13. K.S.A. 74-4964 is hereby amended to read as follows: 74-
4964. (1) A member may elect to have such member's retirement benefit
paid under one of the options provided in this section in lieu of having it
paid in the form stated in subsections (1) and (2) of K.S.A. 74-4958 and
amendments thereto. Such election must be made before the date of
actual retirement. Only a specific individual person may be designated as
a joint annuitant at the time of election of the joint and 1/2 to joint an-
nuitant survivor option, the joint and survivor option and the joint and 3/4
to joint annuitant survivor option. Under no circumstances may an option
be changed or canceled nor the named joint annuitant changed after the
date of actual retirement of the member.

      (2) The amount of a retirement benefit payable under an option shall
be based on the age of the member and, if applicable, the age of the joint
annuitant, and shall be such amount as to be the actuarial equivalent of
the retirement benefit otherwise payable under subsections (1) or (2) of
K.S.A. 74-4958 and amendments thereto as prescribed under subsection
(5). In no case shall the total amount of retirement benefit paid under
any option provided in this section be more than 100% of the retirement
benefit which would have been otherwise payable if no option had been
elected under this section.

      (3) If a member who was, up to the entry date of such member's
employer, covered by a pension system under the provisions of K.S.A.
13-14a01 to 13-14a14, inclusive or 14-10a01 through 14-10a15, inclusive,
and amendments thereto so elects one of the options under this section,
payment of such option shall be in lieu of any payments provided in
subsection (3) of K.S.A. 74-4958 and amendments thereto.

      (4) Such election of an option shall become null and void upon the
death of a member prior to such member's retirement, except that if a
member, who is eligible to retire in accordance with the provisions of
subsections (1) and (2) of K.S.A. 74-4958 and amendments thereto, dies
without having actually retired the member's spouse, if the spouse is
beneficiary for the member's accumulated contributions, and no benefits
are payable under subsections (1) and (2) of K.S.A. 74-4959 and amend-
ments thereto, may elect to receive benefits under one of the options
provided in this section, in lieu of receiving the member's accumulated
contributions.

      (5) The following retirement options which are subject to the provi-
sions of K.S.A. 74-49,123 and amendments thereto, are available:

      (A) Joint and 1/2 to joint annuitant survivor. A reduced retirement
benefit is payable to the retirant during the retirant's lifetime in a monthly
amount equal to the product of (A) the monthly payment of the retire-
ment annuity otherwise payable under K.S.A. 74-4958 and amendments
thereto and (B) the percentage equal to 94.5% minus .2% for each year
by which the age of the retirant's joint annuitant is less than the retirant's
age, computed to the nearest whole year, or plus .2% for each year by
which the age of the retirant's joint annuitant is more than the retirant's
age, computed to the nearest whole year, with 1/2 of that monthly amount
continued to the retirant's joint annuitant during such joint annuitant's
remaining lifetime, if any, after the death of the retirant. In the event that
the designated joint annuitant under this option predeceases the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under this option shall be adjusted automatically to the retirement benefit
which the retirant would have received if no option had been elected
under this section.

      (B) Joint and survivor. A reduced retirement benefit is payable to
the retirant during the retirant's lifetime in a monthly amount equal to
the product of (A) the monthly payment of the retirement annuity oth-
erwise payable under K.S.A. 74-4958 and amendments thereto and (B)
the percentage equal to 88% minus .4% for each year by which the age
of the retirant's joint annuitant is less than the retirant's age, computed
to the nearest whole year, or plus .4% for each year by which the age of
the retirant's joint annuitant is more than the retirant's age, computed to
the nearest whole year, with that monthly amount continued to the joint
annuitant during the joint annuitant's remaining lifetime, if any, after the
death of retirant. In the event that the designated joint annuitant under
this option predeceases the retirant, the amount of the retirement benefit
otherwise payable to the retirant under this option shall be adjusted au-
tomatically to the retirement benefit which the retirant would have re-
ceived if no option had been elected under this section.

      (C) Joint and 3/4 to joint annuitant survivor. A reduced retirement
benefit is payable to the retirant during the retirant's lifetime in a monthly
amount equal to the product of (A) the monthly payment of the retire-
ment annuity otherwise payable under K.S.A. 74-4958 and amendments
thereto and (B) the percentage equal to 91% minus .3% for each year by
which the age of the retirant's joint annuitant is less than the retirant's
age, computed to the nearest whole year, or plus .3% for each year by
which the age of the retirant's joint annuitant is more than the retirant's
age, computed to the nearest whole year, with 3/4 of that monthly amount
continued to the retirant's joint annuitant during such joint annuitant's
remaining lifetime, if any, after the death of the retirant. In the event that
the designated joint annuitant under this option predeceases the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under this option shall be adjusted automatically to the retirement benefit
which the retirant would have received if no option had been elected
under this section.

      (D) Life with 5 years certain. A reduced retirement benefit is payable
to the retirant during the retirant's lifetime in a monthly amount equal
to 99% of the monthly payment of the retirement benefit otherwise pay-
able under K.S.A. 74-4958 and amendments thereto, and if the retirant
dies within the five-year certain period, measured from the commence-
ment of retirement benefit payments, such payments will be continued
to the retirant's beneficiary during the balance of the five-year certain
period.

      (E) Life with 10 years certain. A reduced retirement benefit is pay-
able to the retirant during the retirant's lifetime in a monthly amount
equal to 98% of the monthly payment of the retirement benefit otherwise
payable under K.S.A. 74-4958 and amendments thereto, and if the retir-
ant dies within the ten-year certain period, measured from the com-
mencement of retirement benefit payments, such payments will be con-
tinued to the retirant's beneficiary during the balance of the ten-year
certain period.

      (F) Life with 15 years certain. A reduced retirement benefit is pay-
able to the retirant during the retirant's lifetime in a monthly amount
equal to 92% of the monthly payment of the retirement benefit otherwise
payable under K.S.A. 74-4958 and amendments thereto, and if the retir-
ant dies within the fifteen-year certain period, measured from the com-
mencement of retirement benefit payments, such payments will be con-
tinued to the retirant's beneficiary during the balance of the fifteen-year
certain period.

      (G) Lump sum payment at retirement. (i) Pursuant to this option, the
member must specify a lump sum amount to be paid to the member
upon the member's retirement. The lump sum amount will be based on
the actuarial present value of the benefit as provided in K.S.A. 74-4958,
and amendments thereto. The lump sum amount designated by the mem-
ber must be in 10% increments and shall not exceed 1/2 of the actuarial
present value of the benefit provided in K.S.A. 74-4958, and amendments
thereto. If the member's spouse elects a lump sum payment as provided
in this section pursuant to the provisions of subsection (6), the lump sum
payment will be based on the present value of the retirement option se-
lected by the spouse. The lump sum amount designated by the spouse
must be in 10% increments and shall not exceed 1/2 of the actuarial present
value of the option selected in this section.

      (ii) Pursuant to this option, the member must elect to have the re-
maining actuarial present value paid in a monthly amount under the pro-
visions of K.S.A. 74-4958, and amendments thereto, or subsections (5)(A)
through (5)(F) of this section.

      (iii) In the event that the designated joint annuitant pursuant to sub-
section (5)(A), (5)(B) or (5)(C) under this option predeceases the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under this option shall be adjusted automatically to the retirement benefit
which the retirant would have received if no option had been elected
under this section.

      (iv) The provisions of this subsection shall be effective on and after
July 1, 2001.

      (6) On and after July 1, 1996, if a member with 20 or more years of
credited service dies before attaining retirement age, the member's
spouse, if the spouse is the sole beneficiary for the member's accumulated
contributions, may elect to receive benefits under one of the options
provided in this section in lieu of receiving the member's accumulated
contributions or in lieu of receiving benefits as provided in K.S.A. 74-
4959 and amendments thereto. Payments under one of the options pro-
vided in this section to the member's spouse if so elected, shall commence
on the date that the member would have attained retirement age.

      (7) Benefits payable to a joint annuitant shall accrue from the first
day of the month following the death of a member or retirant and, in the
case of the joint and 1/2 to joint annuitant survivor option, the joint and
survivor option and the joint and 3/4 to joint annuitant survivor option,
shall end on the last day of the month in which the joint annuitant dies.

      (8) The provisions of the law in effect on the retirement date of a
member under the system shall govern the retirement benefit payable to
the retirant and any joint annuitant, except, for retirement benefits pay-
able after July 1, 1993, for retirants who retired prior to July 1, 1982, in
the event that the designated joint annuitant under the option provided
in subsection (5)(A), (B) or (C), as applicable, predeceased the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under the option provided in subsection (5)(A), (B) or (C), as applicable,
shall be adjusted automatically to the retirement benefit which the retir-
ant would have received if no option had been elected under this section.

      (9) Upon the death of a joint annuitant who is receiving a retirement
benefit under the provisions of this section, there shall be paid to such
joint annuitant's beneficiary an amount equal to the excess, if any, of the
accumulated contributions of the retirant over the sum of all retirement
benefit payments made to such retirant and such joint annuitant. Such
joint annuitant shall designate a beneficiary by filing in the office of the
retirement system such designation at the time of death of the retirant.
If there is no named beneficiary of such joint annuitant living at the time
of death of such joint annuitant, any amount provided for by this section
shall be paid to, in order of preference as follows:

      (A) The joint annuitant's surviving spouse;

      (B) the joint annuitant's dependent child or children;

      (C) the joint annuitant's dependent parent or parents;

      (D) the joint annuitant's nondependent child or children;

      (E) the joint annuitant's nondependent parent or parents; or

      (F) the estate of the deceased joint annuitant.

      (10) The provisions of this section shall apply only to members who
were appointed or employed prior to July 1, 1989, and who did not make
an election pursuant to K.S.A. 74-4955a and amendments thereto.

      Sec.  14. K.S.A. 74-4964a is hereby amended to read as follows: 74-
4964a. (1) A member may elect to have such member's retirement benefit
paid under one of the options provided in this section in lieu of having it
paid in the form stated in subsections (1) and (2) of K.S.A. 74-4958 and
amendments thereto. Such election must be made before the date of
actual retirement. Only a specific individual person may be designated as
a joint annuitant at the time of election of the joint and 1/2 to joint an-
nuitant survivor option, the joint and survivor option and the joint and 3/4
to joint annuitant survivor option. Under no circumstances may an option
be changed or canceled nor the named joint annuitant changed after the
date of actual retirement of the member.

      (2) The amount of a retirement benefit payable under an option shall
be based on the age of the member and, if applicable, the age of the joint
annuitant, and shall be such amount as to be the actuarial equivalent of
the retirement benefit otherwise payable under subsections (1) or (2) of
K.S.A. 74-4958 and amendments thereto as prescribed under subsection
(5). In no case shall the total amount of retirement benefit paid under
any option provided in this section be more than 100% of the retirement
benefit which would have been otherwise payable if no option had been
elected under this section.

      (3) If a member who was, up to the entry date of such member's
employer, covered by a pension system under the provisions of K.S.A.
13-14a01 through 13-14a14, inclusive or 14-10a01 through 14-10a15, in-
clusive, and amendments thereto so elects one of the options under this
section, payment of such option shall be in lieu of any payments provided
in subsection (3) of K.S.A. 74-4958 and amendments thereto.

      (4) Such election of an option shall become null and void upon the
death of a member prior to such member's retirement, except that if a
member, who is eligible to retire in accordance with the provisions of
subsections (1) and (2) of K.S.A. 74-4958 and amendments thereto, dies
without having actually retired the member's spouse, if the spouse is
beneficiary for the member's accumulated contributions, and no benefits
are payable under subsections (1) and (2) of K.S.A. 74-4959 and amend-
ments thereto, may elect to receive benefits under one of the options
provided in this section, in lieu of receiving the member's accumulated
contributions.

      (5) The following retirement options which are subject to the provi-
sions of K.S.A. 74-49,123 and amendments thereto, are available:

      (A) Joint and 1/2 to joint annuitant survivor. A reduced retirement
benefit is payable to the retirant during the retirant's lifetime in a monthly
amount equal to the product of (A) the monthly payment of the retire-
ment annuity otherwise payable under K.S.A. 74-4958 and amendments
thereto and (B) the percentage equal to 94.5% minus .2% for each year
by which the age of the retirant's joint annuitant is less than the retirant's
age, computed to the nearest whole year, or plus .2% for each year by
which the age of the retirant's joint annuitant is more than the retirant's
age, computed to the nearest whole year, with 1/2 of that monthly amount
continued to the retirant's joint annuitant during such joint annuitant's
remaining lifetime, if any, after the death of the retirant. In the event that
the designated joint annuitant under this option predeceases the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under this option shall be adjusted automatically to the retirement benefit
which the retirant would have received if no option had been elected
under this section.

      (B) Joint and survivor. A reduced retirement benefit is payable to
the retirant during the retirant's lifetime in a monthly amount equal to
the product of (A) the monthly payment of the retirement annuity oth-
erwise payable under K.S.A. 74-4958 and amendments thereto and (B)
the percentage equal to 88% minus .4% for each year by which the age
of the retirant's joint annuitant is less than the retirant's age, computed
to the nearest whole year, or plus .4% for each year by which the age of
the retirant's joint annuitant is more than the retirant's age, computed to
the nearest whole year, with that monthly amount continued to the joint
annuitant during the joint annuitant's remaining lifetime, if any, after the
death of retirant. In the event that the designated joint annuitant under
this option predeceases the retirant, the amount of the retirement benefit
otherwise payable to the retirant under this option shall be adjusted au-
tomatically to the retirement benefit which the retirant would have re-
ceived if no option had been elected under this section.

      (C) Joint and 3/4 to joint annuitant survivor. A reduced retirement
benefit is payable to the retirant during the retirant's lifetime in a monthly
amount equal to the product of (A) the monthly payment of the retire-
ment annuity otherwise payable under K.S.A. 74-4958 and amendments
thereto and (B) the percentage equal to 91% minus .3% for each year by
which the age of the retirant's joint annuitant is less than the retirant's
age, computed to the nearest whole year, or plus .3% for each year by
which the age of the retirant's joint annuitant is more than the retirant's
age, computed to the nearest whole year, with 3/4 of that monthly amount
continued to the retirant's joint annuitant during such joint annuitant's
remaining lifetime, if any, after the death of the retirant. In the event that
the designated joint annuitant under this option predeceases the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under this option shall be adjusted automatically to the retirement benefit
which the retirant would have received if no option had been elected
under this section.

      (D) Life with 5 years certain. A reduced retirement benefit is payable
to the retirant during the retirant's lifetime in a monthly amount equal
to 99% of the monthly payment of the retirement benefit otherwise pay-
able under K.S.A. 74-4958 and amendments thereto, and if the retirant
dies within the five-year certain period, measured from the commence-
ment of retirement benefit payments, such payments will be continued
to the retirant's beneficiary during the balance of the five-year certain
period.

      (E) Life with 10 years certain. A reduced retirement benefit is pay-
able to the retirant during the retirant's lifetime in a monthly amount
equal to 98% of the monthly payment of the retirement benefit otherwise
payable under K.S.A. 74-4958 and amendments thereto, and if the retir-
ant dies within the ten-year certain period, measured from the com-
mencement of retirement benefit payments, such payments will be con-
tinued to the retirant's beneficiary during the balance of the ten-year
certain period.

      (F) Life with 15 years certain. A reduced retirement benefit is pay-
able to the retirant during the retirant's lifetime in a monthly amount
equal to 92% of the monthly payment of the retirement benefit otherwise
payable under K.S.A. 74-4958 and amendments thereto, and if the retir-
ant dies within the fifteen-year certain period, measured from the com-
mencement of retirement benefit payments, such payments will be con-
tinued to the retirant's beneficiary during the balance of the fifteen-year
certain period.

      (G) Lump sum payment at retirement. (i) Pursuant to this option, the
member must specify a lump sum amount to be paid to the member
upon the member's retirement. The lump sum amount will be based on
the actuarial present value of the benefit as provided in K.S.A. 74-4958a,
and amendments thereto. The lump sum amount designated by the mem-
ber must be in 10% increments and shall not exceed 1/2 of the actuarial
present value of the benefit provided in K.S.A. 74-4958a, and amend-
ments thereto. If the member's spouse elects a lump sum payment as
provided in this section pursuant to the provisions of subsection (6), the
lump sum payment will be based on the present value of the retirement
option selected by the spouse. The lump sum amount designated by the
spouse must be in 10% increments and shall not exceed 1/2 of the actuarial
present value of the option selected in this section.

      (ii) Pursuant to this option, the member must elect to have the re-
maining actuarial present value paid in a monthly amount under the pro-
visions of K.S.A. 74-4958a, and amendments thereto, or subsections
(5)(A) through (5)(F) of this section.

      (iii) In the event that the designated joint annuitant pursuant to sub-
section (5)(A), (5)(B) or (5)(C) under this option predeceases the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under this option shall be adjusted automatically to the retirement benefit
which the retirant would have received if no option had been elected
under this section.

      (iv) The provisions of this subsection shall be effective on and after
July 1, 2001.

      (6) On and after July 1, 1996, if a member with 20 or more years of
credited service dies before attaining retirement age, the member's
spouse, if the spouse is the sole beneficiary for the member's accumulated
contributions, may elect to receive benefits under one of the options
provided in this section in lieu of receiving the member's accumulated
contributions or in lieu of receiving benefits as provided in K.S.A. 74-
4959 and amendments thereto. Payments under one of the options pro-
vided in this section to the member's spouse if so elected, shall commence
on the date that the member would have attained retirement age.

      (7) Benefits payable to a joint annuitant shall accrue from the first
day of the month following the death of a member or retirant and, in the
case of the joint and 1/2 to joint annuitant survivor option, the joint and
survivor option and the joint and 3/4 to joint annuitant survivor option,
shall end on the last day of the month in which the joint annuitant dies.

      (8) The provisions of the law in effect on the retirement date of a
member under the system shall govern the retirement benefit payable to
the retirant and any joint annuitant, except, for retirement benefits pay-
able after July 1, 1993, for retirants who retired prior to July 1, 1982, in
the event that the designated joint annuitant under the option provided
in subsection (5)(A), (B) or (C), as applicable, predeceased the retirant,
the amount of the retirement benefit otherwise payable to the retirant
under the option provided in subsection (5)(A), (B) or (C), as applicable,
shall be adjusted automatically to the retirement benefit which the retir-
ant would have received if no option had been elected under this section.

      (9) Upon the death of a joint annuitant who is receiving a retirement
benefit under the provisions of this section, there shall be paid to such
joint annuitant's beneficiary an amount equal to the excess, if any, of the
accumulated contributions of the retirant over the sum of all retirement
benefit payments made to such retirant and such joint annuitant. Such
joint annuitant shall designate a beneficiary by filing in the office of the
retirement system such designation at the time of death of the retirant.
If there is no named beneficiary of such joint annuitant living at the time
of death of such joint annuitant, any amount provided for by this section
shall be paid to, in order of preference as follows:

      (A) The joint annuitant's surviving spouse;

      (B) the joint annuitant's dependent child or children;

      (C) the joint annuitant's dependent parent or parents;

      (D) the joint annuitant's nondependent child or children;

      (E) the joint annuitant's nondependent parent or parents; or

      (F) the estate of the deceased joint annuitant.

      (10) The provisions of this section shall be effective on and after July
1, 1989, and shall apply only to members who were appointed or em-
ployed prior to July 1, 1989, and who made an election pursuant to K.S.A.
74-4955a and amendments thereto; and persons appointed or employed
on or after July 1, 1989.

      Sec.  15. K.S.A. 74-49,110 is hereby amended to read as follows: 74-
49,110. There is hereby created the retirant dividend payment reserve in
the Kansas public employees retirement fund. Prior to October 1, 1980,
and each October 1 thereafter, the board of trustees of the Kansas public
employees retirement system shall credit to the retirant dividend payment
reserve an amount equal to the lesser of (1) the amount equal to fifteen
percent (15%) of the net amount of interest and dividend income during
the fiscal year ending on the next preceding June 30 on the investment
of the moneys in the fund, adjusted for all realized gains and losses at the
end of such fiscal year or (2) the amount equal to the total of (A) the
amount required to pay the maximum benefits under K.S.A. 74-49,111,
and amendments thereto during the current year and (B) the amount
which was required to pay the maximum benefits under K.S.A. 74-49,111
during the preceding year, except that in no case shall the amount cred-
ited under this section result in a carryover balance in the retirant divi-
dend payment reserve, after payment of all retirant dividend payments
that year, of more than an amount equal to the amount which was re-
quired to pay the maximum benefits under K.S.A. 74-49,111 during the
preceding year. Such amounts shall be credited from the retirement ben-
efit accumulation reserve.

      New Sec.  16. (a) For the purpose of financing a portion of the un-
funded actuarial pension liability of the Kansas public employees retire-
ment system, the Kansas development finance authority is hereby au-
thorized to issue one or more series of revenue bonds under the Kansas
development finance authority act in an amount necessary to provide a
deposit or deposits in a total amount not to exceed $500,000,000 to the
Kansas public employees retirement system and to pay the costs of is-
suance of the bonds, including any credit enhancement, and provide any
required reserves for the bonds. The principal amount, interest rates and
final maturity of such revenue bonds and any bonds issued to refund such
bonds or parameters for such principal amount, interest rates and final
maturity shall be approved by a resolution of the state finance council.
The state finance council shall review and determine the lowest cost
method for financing such bonds, including, but not limited to, issues
related to the tax status of the bonds. The bonds, and interest thereon,
issued pursuant to this section shall be payable from moneys appropriated
by the state for such purpose. The bonds and interest thereon, issued
pursuant to this section shall be obligations only of the authority and in
no event shall such bonds constitute an indebtedness or obligation of the
Kansas public employees retirement system or an indebtedness or obli-
gation for which the faith and credit or any assets of the system are
pledged.

      (b) As used in this section, ``unfunded actuarial pension liability''
means the unfunded actuarially accrued liability of the state for the state
of Kansas and participating employers under K.S.A. 74-4931 and amend-
ments thereto portion of such liability of the Kansas public employees
retirement system, determined as of the later of December 31, 2001, or
the end of the most recent calendar year for which an actuarial valuation
report is available and certified to the Kansas development finance au-
thority by the executive secretary of the Kansas public employees retire-
ment system.

      (c)  (1) The authority may pledge the contract or contracts authorized
in subsection (d), or any part thereof, for the payment or redemption of
the bonds, and covenant as to the use and disposition of money available
to the authority for payments of the bonds. The authority is authorized
to enter into any agreements necessary or desirable to effectuate the
purposes of this section.

      (2) The proceeds from the sale of the bonds, other than refunding
bonds, issued pursuant to this section, after payment of any costs related
to the issuance of such bonds, shall be paid by the authority to the Kansas
public employees retirement system to be applied to the payment, in full
or in part, of the unfunded accrued pension liability as directed by the
Kansas public employees retirement system.

      (3) The state hereby pledges and covenants with the holders of any
bonds issued pursuant to the provisions of this section, that it will not
limit or alter the rights or powers vested in the authority by this section,
nor limit or alter the rights or powers of the authority, the department of
administration or the Kansas public employees retirement system, in any
manner which would jeopardize the interest of the holders or any trustee
of such holders or inhibit or prevent performance or fulfillment by the
authority, the department of administration or the Kansas public em-
ployees retirement system with respect to the terms of any agreement
made with the holders of the bonds or agreements made pursuant to this
section, except that the failure of the legislature to appropriate moneys
for any purpose shall not be deemed a violation of this pledge and cov-
enant. The department of administration is hereby specifically authorized
to include this pledge and covenant in any agreement with the authority.
The authority is hereby specifically authorized to include this pledge and
covenant in any bond resolution, trust indenture or agreement for the
benefit of holders of the bonds.

      (4) Revenue bonds may be issued pursuant to this section without
obtaining the consent of any department, division, commission, board or
agency of the state, other than the approvals of the state finance council
required by this section, and without any other proceedings or the oc-
currence of any other conditions or other things other than those pro-
ceedings, conditions or things which are specifically required by the Kan-
sas development finance authority act.

      (d) The department of administration and the authority are author-
ized to enter into one or more contracts to implement the payment ar-
rangement that is provided for in this section. The contract or contracts
shall provide for payment of the amounts required to be paid pursuant
to this section and shall set forth the procedure for the transfer of moneys
for the purpose of paying such moneys. The contract or contracts shall
contain such terms and conditions including principal amount, interest
rates and final maturity as shall be approved by resolution of the state
finance council and shall include, but not be limited to, terms and con-
ditions necessary or desirable to provide for repayment of and to secure
any bonds of the authority issued pursuant to this section.

      (e) The approvals by the state finance council required by subsection
(a) and (d) are hereby characterized as matters of legislative delegation
and subject to the guidelines prescribed in subsection (c) of K.S.A. 75-
3711c and amendments thereto. Such approvals may be given by the state
finance council when the legislature is in session.

      (f) No bonds shall be issued pursuant to this section prior to the
review of and recommendation to the state finance council of such issu-
ance by the joint committee on pensions, investments and benefits.

      New Sec.  17. (a) For the purposes of providing the ``insured death
benefit'' and ``long-term disability benefit'' as prescribed in K.S.A. 74-
4927 and amendments thereto and of providing the ``accidental death
benefit'' as prescribed in subsection (2) of K.S.A. 74-4916 and amend-
ments thereto, to all members of the legislature who have failed to file
the election to become a member of the retirement system pursuant to
K.S.A. 74-4911 and amendments thereto, and who have filed an election
to be covered pursuant to the provisions of K.S.A. 74-4916 and 74-4927
and amendments thereto as provided in this subsection, the term ``mem-
ber'' as used in K.S.A. 74-4927 and amendments thereto and subsection
(2) of K.S.A. 74-4916 and amendments thereto and as used in this section
shall include such members of the legislature. Such election as provided
in this subsection shall be filed with the system within 90 days of the
effective date of this act or within 90 days after taking the oath of office.
If a member of the legislature fails to file such election as provided in
this subsection, it shall be presumed such member of the legislature has
elected to not be covered pursuant to the provisions of K.S.A. 74-4916
and 74-4927 and amendments thereto.

      (b) The division of legislative administrative services shall pay to the
Kansas public employees retirement system in such manner as the board
of trustees shall prescribe, an amount sufficient to pay the employer's
contribution to the group insurance reserve as provided in subsection (4)
of K.S.A. 74-4927 and amendments thereto.

      (c) The division of legislative administrative services shall maintain a
file of the beneficiaries named by the persons covered under this section
in the form and manner as prescribed by the board of trustees of the
Kansas public employees retirement system.

      New Sec.  18. An employee of a participating employer, as defined
in K.S.A. 74-4902, and amendments thereto, in the Kansas public em-
ployees retirement system, who is a fireman as defined in K.S.A. 74-4952,
and amendments thereto; an emergency medical service technician as
defined in K.S.A. 74-4954a, and amendments thereto; or a policeman as
defined in K.S.A. 74-4952, and amendments thereto; and who is, or who
will be, upon satisfying any required eligibility waiting period, an active
member in either: (a) A retirement plan originally established by a not-
for-profit, nongovernmental fire department as of January 1, 1969, and
subsequently maintained by a participating employer; or (b) a retirement
plan for policemen established by a participating employer as of March
1, 1968, to replace a retirement plan for policemen that was originally
established on April 6, 1961, shall be exempt from membership in the
system.

      New Sec.  19. On and after the effective date of this act, each person
who has retired and has been receiving or who will become eligible to
receive a benefit as provided under subsection (3) of K.S.A. 74-4925, and
amendments thereto and each person who is a former member who was
eligible for assistance pursuant to K.S.A. 74-4925 and amendments
thereto prior to July 1, 1998, shall be a special member of the Kansas
public employees retirement system.

      New Sec.  20. (a) For the purpose of financing the unfunded actuarial
pension liability of the Kansas public employees retirement system re-
lated to persons designated as special members pursuant to section 19
and amendments thereto and related to persons entitled to benefits pur-
suant to the provisions of K.S.A. 74-49,109 and amendments thereto, the
Kansas development finance authority is hereby authorized to issue one
or more series of revenue bonds under the Kansas development finance
authority act in an amount necessary to provide a deposit or deposits in
a total amount not to exceed $40,400,000 of which no more than
$15,500,000 of such deposit or deposits shall be related to persons des-
ignated as special members pursuant to section 19 and amendments
thereto and no more than $24,900,000 of such deposit or deposits shall
be related to persons entitled to benefits pursuant to the provisions of
K.S.A. 74-49,109 and amendments thereto, to the Kansas public employ-
ees retirement system and to pay all amounts required for costs of issu-
ance of the bonds, including any credit enhancement, and to provide any
required reserves for the bonds, capitalized interest and refunding bonds.
The principal amount, interest rates and final maturity of such revenue
bonds and any bonds issued to refund such bonds or parameters for such
principal amount, interest rates and final maturity shall be approved by
the secretary of administration, except that the final maturity of such
revenue bonds shall not exceed 10 years. The bonds, and interest thereon,
issued pursuant to this section shall be payable from moneys appropriated
by the state for such purpose. The bonds and interest thereon, issued
pursuant to this section shall be obligations only of the authority and in
no event shall such bonds constitute an indebtedness or obligation of the
Kansas public employees retirement system or an indebtedness or obli-
gation for which the faith and credit or any assets of the system are
pledged.

      (b) As used in this section, ``unfunded actuarial pension liability''
means the unfunded actuarially accrued liability of the state for persons
designated as special members pursuant to section 19 and amendments
thereto and for persons entitled to benefits pursuant to the provisions of
K.S.A. 74-49,109 and amendments thereto, determined as of the later of
December 31, 2001, or the end of the most recent calendar year for which
an actuarial valuation report is available and certified to the Kansas de-
velopment finance authority by the executive secretary of the Kansas pub-
lic employees retirement system.

      (c)  (1) The authority may pledge the contract or contracts authorized
in subsection (d), or any part thereof, for the payment or redemption of
the bonds, and covenant as to the use and disposition of money available
to the authority for payments of the bonds. The authority is authorized
to enter into any agreements necessary or desirable to effectuate the
purposes of this section.

      (2) The proceeds from the sale of the bonds, other than refunding
bonds, issued pursuant to this section, after payment of any costs related
to the issuance of such bonds, any required reserves and any capitalized
interest, shall be paid by the authority to the Kansas public employees
retirement system to be applied to the payment, in full or in part, of the
unfunded accrued pension liability as directed by the Kansas public em-
ployees retirement system.

      (3) The state hereby pledges and covenants with the holders of any
bonds issued pursuant to the provisions of this section, that it will not
limit or alter the rights or powers vested in the authority by this section,
nor limit or alter the rights or powers of the authority, the state board of
regents or the Kansas public employees retirement system, in any manner
which would jeopardize the interest of the holders or any trustee of such
holders or inhibit or prevent performance or fulfillment by the authority,
the state board of regents or the Kansas public employees retirement
system with respect to the terms of any agreement made with the holders
of the bonds or agreements made pursuant to this section, except that
the failure of the state to appropriate moneys for any purpose shall not
be deemed a violation of this pledge and covenant. The state board of
regents and the Kansas public employees retirement system are hereby
specifically authorized to include this pledge and covenant in any agree-
ment with the authority. The authority is hereby specifically authorized
to include this pledge and covenant in any bond resolution, trust inden-
ture or agreement for the benefit of holders of the bonds.

      (4) Revenue bonds may be issued pursuant to this section without
obtaining the consent of any department, division, commission, board or
agency of the state, other than the approvals of the state finance council
required by this section, and without any other proceedings or the oc-
currence of any other conditions or other things other than those pro-
ceedings, conditions or things which are specifically required by the Kan-
sas development finance authority act.

      (d) The state board of regents, the Kansas public employees retire-
ment system and the authority are authorized to enter into one or more
contracts to implement the payment arrangement that is provided for in
this section. The contract or contracts shall provide for payment of the
amounts required to be paid pursuant to this section and shall set forth
the procedure for the transfer of moneys for the purpose of paying such
moneys. The contract or contracts shall contain such terms and conditions
including principal amount, interest rates and final maturity as shall be
approved by the secretary of administration and shall include, but not be
limited to, terms and conditions necessary or desirable to provide for
repayment of and to secure any bonds of the authority issued pursuant
to this section.

 Sec.  21. K.S.A. 74-4902, 74-4908, 74-4911f, 74-4918, 74-4920, 74-
4925, 74-4927, 74-4927f, 74-4927k, 74-4963, 74-4963a, 74-4964, 74-
4964a and 74-49,110 and K.S.A. 2002 Supp. 20-2610a are hereby re-
pealed.

 Sec.  22. This act shall take effect and be in force from and after its
publication in the Kansas register.

Approved May 22, 2003.
 Published in the Kansas Register May 29, 2003.
__________