19-20-1001. Payments upon death of member prior to retirement. (1) If a member dies before retirement:

(a) except as provided in subsection (2), a lump-sum refund of the member's account balance must be paid to the member's eligible beneficiary or beneficiaries;

(b) if the deceased member was vested and was an active member in the retirement system within 1 year before the member's death, the eligible beneficiaries receiving a refund under subsection (1)(a) or a retirement allowance under subsection (2) are entitled to receive in equal shares a $500 lump-sum death benefit; and

(c) subject to 19-20-1009, the sum of $200 a month must be paid to each minor child of the deceased member until the child reaches 18 years of age.

(2) (a) In lieu of the refund provided for in subsection (1)(a), if the deceased member was vested, an eligible designated beneficiary who is an individual may elect to receive the beneficiary's interest as a retirement allowance for the beneficiary's lifetime. The retirement allowance must be determined as prescribed in 19-20-804, without reference to 19-20-805(5)(a), in the same manner as if the member elected the option A joint and survivor annuity optional allowance provided for in 19-20-702(2).

(b) The effective date of the retirement allowance provided for in subsection (2)(a) is the earlier of:

(i) the first of the month following the date of death; or

(ii) the effective date of the member's retirement, as acknowledged in writing by the retirement system before the member's death.

(c) (i) If more than one eligible beneficiary elects to receive a retirement allowance, each is entitled to an equal share of the benefit.

(ii) In the event that all eligible beneficiaries who elected a retirement allowance die, the member's account balance, if any, will be paid out to the alternate beneficiary of the last surviving eligible beneficiary who elected a retirement allowance under subsection (2)(a).