(a) Notwithstanding § 8-35-124 or any other law to the contrary, an employee or elected or appointed official of this state, an employee or elected or appointed official of any political subdivision thereof, or a teacher employed with a local education agency who is convicted in any state or federal court of a felony arising out of that employee's or official's employment or official capacity constituting malfeasance in office shall forfeit that person's retirement benefits under the defined benefit component of the plan.

(b) Upon initial conviction, or upon a plea of guilty or nolo contendere, any person subject to this section shall:

(1) Have the employee's or official's benefit stopped immediately, if the employee or official is receiving a benefit under the defined benefit component of the plan; and

(2) Receive a refund of the employee contributions and interest credited to the employee's or official's account, less any benefits received, unless the person elected to have a monthly retirement allowance paid upon such person's death in accordance with subsection (e).

(c) The employing agency is responsible for immediately notifying the administrator of the retirement system of the conviction of any person subject to this section.

(d) In the event the conviction of such person is later overturned in any court and such person is acquitted, or is granted a full pardon, the person shall be restored to all rights, privileges and benefits as if the conviction had never occurred.

(e) Any person convicted of a felony as provided in this section may elect, within six (6) months of the person's conviction, to have a monthly retirement allowance paid to whomever that person had designated as beneficiary on file with the retirement system at the time of that person's conviction; provided, that such beneficiary must have been that person's spouse or child at the time of that person's conviction. The amount of any allowance payable hereunder shall be equal to the retirement allowance which would have been payable under the defined benefit component of the plan had the person retired under an effective election of Option 1 as provided in part 6 of this chapter. The benefits shall be paid to such beneficiary following the person's death and upon meeting all other eligibility requirements applicable to a beneficiary.