(1) In the event the System is terminated or partially terminated the right of all participants or in the event of partial termination the rights of the affected participants, whether retired or otherwise, shall become fully vested.

(2) In the event of termination of the System, the Board shall distribute the net assets of the fund, allowing a period of not less than six (6) nor more than nine (9) months for dissolution of disability claims, as follows:

(a) First, accumulated contributions shall be allocated to each respective participant, former participant, retired member joint annuitant or beneficiary then receiving payments. If these assets are insufficient for this purpose, they shall be allocated to each such person in the proportion which his accumulated contributions bear to the total of all such participants' accumulated contributions. For purposes of this section, contribution means payment into the System by an employer or employee for the benefit of an individual employee.

(b) The balance of such assets, if any, remaining after making the allocations provided in subparagraph (a) of this section shall be disposed of by allocating to each person then having an interest in the fund the excess of his retirement income under the System less the retirement income which is equal to the actuarial equivalent of the amount allocated to him under subparagraph (a) of this section. Such allocation shall be made with the full amount of the remaining assets to be allocated to the persons in each group in the following order of precedence:

(i) those retired members, joint annuitants or beneficiaries receiving benefits,

(ii) those members eligible to retire,

(iii) those members eligible for early retirement,

(iv) former participants electing to receive a vested benefit, and

(v) all other members.

In the event the balance of the fund remaining after all allocations have been made with respect to all retirement income in a preceding group is insufficient to allocate the full actuarial equivalent of such retirement income to all persons in the group for which it is then being applied, such balance of the fund shall be allocated to each person in such group in the proportion which the actuarial equivalent of the retirement income allocable to him pursuant to such group bears to the total actuarial equivalent of the retirement income so allocable to all persons in such group.

Provided no discrimination in value results, the Board shall distribute the amounts so allocated in one of the following manners as the Board in their discretion may determine:

(i) by continuing payment of benefits as they become due, or

(ii) by paying, in cash, the amount allocated to any such person.

Laws 1978, c. 310, § 1, emerg. eff. May 11, 1978; Laws 1980, c. 357, § 5, eff. July 1, 1980.