(a) When a change or error is made in the records maintained by the plan or in the contributions made on behalf of an employee or an error is made in computing a benefit, and, as a result, a teacher or member or beneficiary is entitled to receive from the plan more or less than the teacher or member or beneficiary would have been entitled to receive had the records or contributions been correct or had the error not been made, (1) the records, contributions, or error shall be corrected, and (2) as far as practicable, future payments or benefit entitlement shall be adjusted so that the actuarial equivalent of the pension or benefit to which the teacher or member or beneficiary was correctly entitled will be paid. An adjustment to contributions shall be picked up by the employer in accordance with AS 14.25.050 or treated as an adjustment to the employer's contributions in accordance with this section, depending upon the nature of the adjustment. If no future benefit payments are due, a person who was paid any amount to which the person was not entitled is liable for repayment of that amount, and a person who was not paid the full amount to which the person was entitled shall be paid that amount.

(b) An adjustment that requires the recovery of benefits may not be made under this section if

(1) the incorrect benefit was first paid two years or more before the member or beneficiary was notified of the error;

(2) the error was not the result of erroneous information supplied by the member or beneficiary; and

(3) the member or beneficiary did not have reasonable grounds to believe that the amount of the benefit was in error.

(c) At least quarterly, the administrator shall report to the commissioner of administration on all situations since the administrator's last report in which an adjustment has been prohibited under (b) of this section. If the commissioner of administration finds that there is reason to believe that one or more of the conditions set out in (b) of this section have not been met, the administrator shall notify the member or beneficiary that an adjustment will be made to recover the overpayment. A member or beneficiary who receives notice of adjustment under this subsection may file a request with the commissioner of administration for a waiver of the adjustment under AS 14.25.175. An adjustment that requires the repayment of benefits may not be required while the waiver request is pending.

(d) The plan shall pay interest on amounts owed to a member or beneficiary. Interest shall be charged on amounts owed to the plan by a member or beneficiary if the amount owed is the result of erroneous information supplied by the member or beneficiary, or the member or beneficiary had reasonable grounds to believe the amount of the benefit was in error. The interest paid under this subsection is at the rate established by regulation for indebtedness contributions owed. Interest accrues from the date on which the correct payment was due and continues until an actuarial adjustment to the benefit is effective or the amount owed is paid. Accrued interest for periods less than 60 days or in amounts less than the limit established in regulation for writing off small indebtedness and refund balances may not be collected or paid under this subsection.