(a) If (1) the death of an employee occurs before the employee's retirement and before the employee's normal retirement date, (2) the proximate cause of death is a bodily injury sustained or a hazard undergone while in the performance and within the scope of the employee's duties, and (3) the injury or hazard is not the proximate result of wilful negligence of the employee, a monthly survivor's pension shall be paid to the surviving spouse. If there is no surviving spouse or if the spouse later dies, the monthly survivor's pension shall be paid in equal parts to the dependent children of the employee.

(b) The first payment of the surviving spouse's pension or of a dependent child's pension shall be made for the month following the month in which the employee dies. Payments shall cease on the last day of the month in which there is no longer an eligible spouse or eligible dependent child, or the last day of the month following the earliest date the employee would have first qualified for normal retirement if the employee had survived, whichever day is sooner.

(c) The monthly survivor's pension in (b) of this section for survivors of employees who were not peace officers or firefighters is 40 percent of the employee's monthly compensation in the month in which the employee dies. The monthly survivor's pension in (b) of this section for survivors of employees who were peace officers or firefighters is 50 percent of the monthly compensation in the month in which the employee dies. While the monthly survivor's pension is being paid, the survivor is not entitled to elect distributions from the employee's individual contribution account under AS 39.35.810, except as required by AS 39.35.840. While the monthly survivor's pension is being paid, the employer shall make contributions with respect to the employee's surviving spouse and employee's surviving dependent children based on the deceased employee's gross monthly compensation at the time of occupational death

(1) that would have been paid to the employee's individual account under AS 39.35.730 and 39.35.750(a), to the trust account established under AS 39.35.750(e), without deduction from the survivor's pension; and

(2) to the appropriate accounts and funds under AS 39.35.750(b) - (e).

(d) If an employee's death is caused by an act of assault, assassination, or terrorism directly related to the person's status as an employee, whether the act occurs on or off the employee's job site, the death shall be considered to have occurred in the performance of and within the scope of the employee's duties for purposes of (a)(2) of this section. If the expressed or apparent motive and intent of the perpetrator of the harm inflicted upon the employee was due to the performance of the employee's job duties or employment, the death shall be considered to be directly related to the employee's status as an employee. An employee's job duties are those performed within the course and scope of the person's employment with an employer.

(e) On the date the employee would have first qualified for normal retirement if the employee had survived, the retirement benefit shall be determined under the provisions of AS 39.35.820 - 39.35.840, 39.35.870, and 39.35.880. In addition to payment of the member's individual account, the surviving spouse or, if there is no surviving spouse, the surviving dependent children of the member, shall receive an additional benefit in an amount equal to the accumulated contributions that would have been made to the deceased member's individual account under AS 39.35.730(a) and 39.35.750(a), based on the deceased member's gross monthly compensation at the time of occupational death, from the time of the member's death to the date the member would have first qualified for normal retirement if the member had survived. Earnings shall be allocated to the additional benefit calculated under this subsection based on the actual rate of return, net of expenses, of the trust account established under AS 39.35.750(e) over the period that such contributions would have been made. This additional amount and allocated earnings shall be paid in the same manner as determined for the member's individual account under AS 39.35.820 - 39.35.860 to the extent permitted by the Internal Revenue Service. An employee who died and whose survivors receive occupational death benefits under this section shall be considered to have retired directly from the plan on the date the employee would have first qualified for normal retirement if the employee had survived. The period of time during which a survivor's pension is paid under this section constitutes membership service for the purpose of determining vesting in employer contributions under AS 39.35.790(b) and eligibility for medical benefits under AS 39.30.300 - 39.30.495 and AS 39.35.700 - 39.35.990.