(a) Before the date the first payment of an annuity becomes due, but not thereafter, a person about to become a retirant may elect, in lieu of a straight life annuity as set forth in § 24-5-115, to have the annuity reduced and to nominate a beneficiary, as provided by Option A or Option B:

(1) Option A.

(A)

(i) Under Option A, an annuity payable to the retirant shall be reduced by an amount calculated to provide an actuarially equivalent benefit to the annuity payable under § 24-5-115.

(ii) This subdivision (a)(1)(A) shall apply to all members and retirants.

(B) If the retirant dies before having received one hundred twenty (120) monthly payments of the reduced annuity, the reduced annuity to which the retirant would have been entitled, if living, shall be paid for the remainder of the one-hundred-twenty-month period to such person as the deceased retirant shall have nominated by written designation, duly executed and filed with the Board of Trustees of the Arkansas State Highway Employees' Retirement System.

(C) If the beneficiary does not survive the retirant, the retirant may name another beneficiary, or failing to name a beneficiary, the annuity reserve for the annuity for the remainder of the one-hundred-twenty-month period shall be paid to the retirant's estate.

(D) If the beneficiary survives the retirant but dies before the end of the one-hundred-twenty-month period, the annuity reserve for the annuity for the remainder of the one-hundred-twenty-month period shall be paid to the beneficiary's designated beneficiary; or

(2) Option B.

(A) (i) (a) Under Option B, an annuity payable to the retirant and surviving beneficiary shall be reduced by an amount calculated to provide an actuarially equivalent benefit to the annuity payable under § 24-5-115.

(b) The reduction factor is calculated as the ratio of the actuarial present value of a joint and a fifty percent (50%) survivor annuity to the actuarial present value of the annuity payable under § 24-5-115.

(c) The present values are calculated using standard actuarial formulas and based on a mortality table and discount interest rate calculated by the plan's actuary.

(d) This subdivision (a)(2)(A)(i) applies to all members and retirants.

(ii) Upon the retirant's death, one-half (1/2) of the reduced annuity to which the retirant would have been entitled, if living, shall be paid to the surviving beneficiary for the remainder of his or her life, if the beneficiary was either the retirant's spouse for at least two (2) years immediately preceding the first payment due date of the retired member's annuity or another person age forty (40) or older on the first payment due date receiving more than one-half (1/2) of his or her support from the retirant for at least two (2) years immediately preceding the first payment due date of the retired member's annuity.

(iii) If both the retirant and his or her named beneficiary die before the annuity payments have amounted to the sum of the member's accumulated contributions and interest that is vested at the date of retirement, the difference between the benefits paid and the member's contribution account at the date of retirement shall be paid to the estate of the person to whom the last annuity preceding death was paid.

(iv) If no annuities had been paid prior to the member's death, then the balance in the member's account shall be paid to the member's estate.

(B)

(i) Should the eligible beneficiary of a member retirant who selected Option B predecease the member retirant, or if divorce or other marriage dissolution occurs, or should the beneficiary who is not a spouse cease to be a qualified beneficiary, then the retirant, by written notification to the Arkansas State Highway Employees' Retirement System, may cancel Option B chosen at retirement and return to a straight life annuity, to be effective the month following receipt of the notification by the system.

(ii) The straight life annuity so elected shall then be the amount of the Option B annuity at the date of notification, less any increase that is excluded from the base annuity, multiplied by a fraction, the numerator of which is one hundred (100) and the denominator of which is the percentage of the straight life annuity that the retirant received at the date of retirement, plus the nonbase increase that was excluded in the computation. The effect of the foregoing shall be that the retirant's monthly annuity, after cancellation of Option B, shall be the same amount that it would have been had a straight life annuity been selected at the date of retirement.

(iii) No further changes in benefit options for retirants shall be permitted.

(b) If an active member with five (5) or more years of credited service, including credited service for the year immediately preceding his or her death, dies in employer service before retirement, the applicable benefits provided in this section shall be paid upon written application to the board. It is the intent of this section to include all surviving spouses or beneficiaries, regardless of the time of the death of the member.

(c) The effective date of the benefits provided in this section shall in no event be prior to the first day succeeding the member's death.

(d) A member's surviving spouse who was married to the member at least the one (1) year immediately preceding his or her death shall receive an annuity computed in the same manner in all respects as if the member had:

(1) Retired the date of his or her death with entitlement to an annuity provided for in § 24-5-115;

(2) Elected the Option A survivor annuity provided for in subdivision (a)(1) of this section; and

(3) Nominated his or her spouse as joint beneficiary provided for in subdivision (a)(2)(A) of this section.