Limits on pay used for death benefits

(a) Commencing July 1, 1996, compensation used to determine the benefit payable under section 88-84(a)(1) shall be subject to the annual limit set forth in section 401(a)(17) of the Internal Revenue Code of 1986, as amended; provided that there shall be paid to the beneficiary of any member: (1) Who dies while in service or on authorized leave without pay after June 30, 2004, and before July 1, 2006; and (2) Whose compensation earned during the year immediately preceding the member's death exceeds the annual limit set forth in section 401(a)(17) of the Internal Revenue Code of 1986, as amended, a nontax-qualified benefit equal to the difference between the benefit that would have been payable under section 88-84(a)(1) without applying the limit under section 401(a)(17) of the Internal Revenue Code of 1986, as amended, to compensation earned prior to July 1, 2005, and the benefit that is payable under section 88-84(a)(1) applying the limit under section 401(a)(17) of the Internal Revenue Code of 1986, as amended, to the compensation earned during the year immediately preceding the member's death. (b) The nontax-qualified benefit provided by subsection (a) shall be administered by the board of trustees; provided that: (1) State members shall be paid by the respective department or agency that employs the member pursuant to assessments made and received by the system; and (2) County members shall be paid by the respective counties pursuant to assessments made and received by the system. (c) Section 88-91 shall apply to the nontax-qualified benefit.