(a) Notwithstanding any law to the contrary, the service retirement allowance payable under this chapter shall not exceed seventy-five percent (75%) of the member's average final compensation, except as provided in subdivisions (a)(1)-(4).

(1) In the case of Class C members of the superseded Tennessee state retirement system, the service retirement allowance shall not exceed eighty percent (80%) of the member's average final compensation.

(2) In the case of Group 2 members, the service retirement allowance shall not exceed eighty percent (80%) of the member's average final compensation, unless such member is a member by virtue of employment with an employer participating in the retirement system pursuant to chapter 35, part 2, of this title. In such event, the service retirement allowance for such member shall be subject to the seventy-five percent (75%) limit, unless the chief governing body of such employer passes and files with the board of trustees a resolution increasing the limit to eighty percent (80%) and accepting the liability therefor.

(3) In the case of Group 1 members, the service retirement allowance shall not exceed ninety percent (90%) of the member's average final compensation, unless such member is a member by virtue of employment with an employer participating in the retirement system pursuant to chapter 35 of this title. In such event, the service retirement allowance for such member shall be subject to the seventy-five percent (75%) limit, unless the chief governing body of such employer passes and files with the board of trustees a resolution increasing the limit to ninety percent (90%) and accepting the liability therefor.

(4) In the case of Class B members of the superseded state retirement system, the service retirement allowance shall not exceed seventy-seven and one-half percent (77.5%) of the member's average final compensation.

(b) Any teacher or general employee of the state who remains in service after sixty-five (65) years of age shall receive a retirement benefit equal to the greater of the benefit calculated under § 8-36-206, § 8-36-209 or this subsection (b); provided, that:

(1) The retirement allowance payable under this subsection (b) shall be the actuarial equivalent of the benefit which would have been payable to the member at sixty-five (65) years of age in the absence of this section, based on the member's age on the effective date of retirement. The benefit under this subsection (b) shall not exceed that payable at seventy (70) years of age under this subsection (b);

(2) The actuarial equivalent shall be determined using tables provided by the actuary so that the cost to the retirement system for this benefit shall be equal to the cost, assuming the member had retired at sixty-five (65) years of age;

(3) Any option selected by a member under § 8-36-601 shall be based on the member's and beneficiary's actual ages on the effective date of retirement;

(4) This subsection (b) shall not be construed to be a change in formula under § 8-36-702;

(5) This subsection (b) shall be optional for political subdivisions and shall not be effective unless approved by the chief governing body of the political subdivision; and

(6) This subsection (b) shall not apply to any person who becomes a member of the retirement system on or after July 1, 2011.