(1) Except as otherwise provided in this subsection, a judge who is a plan 3 member shall convert $2,250.00 of the state salary standardization payment annually prescribed by law for any state fiscal year beginning after September 30, 1981 as an addition to the judge’s state base salary for purposes of computation of a retirement allowance under this act. A judge who, within 30 days from taking office, files a written notice not to participate in the provisions of this subsection with the retirement system is exempt from this subsection. A judge who was serving on December 31, 1982 and who did not elect to convert $2,250.00 of the state salary standardization payment under section 14a of former 1951 PA 198 is exempt from this section. For the purposes of the calculation of a judge’s combined county, city, or district control unit retirement benefit, a judge who has not filed a written notice not to participate in the provisions of this subsection with the retirement system under this subsection or the former judges retirement system shall have the $2,250.00 of the salary standardization payment subtracted from the final average compensation figure used to calculate the judge’s county, city, or district control unit retirement benefit.

    (2) Except as otherwise provided in this subsection, a judge who is a plan 3 member and who is not exempt from subsection (1) shall convert the balance of the state salary standardization payment annually prescribed by law but which, when added to $2,250.00, does not exceed 40% of the difference between the state base salary and the maximum statutory salary established by the revised judicature act for any state fiscal year beginning after September 30, 1982 as an addition to the judge’s state base salary for purposes of computation of a retirement allowance under this act. A judge who, before April 1, 1983, or within 30 days from taking office, whichever is later, files a written notice not to participate in the provisions of this subsection with the retirement system is exempt from this subsection. For the purposes of the calculation of a judge’s combined county, city, or district control unit retirement benefit, a judge who has not filed a written notice not to participate in the provisions of this subsection with the retirement system under this subsection or the former judges retirement system shall have the additional state salary standardization payment as an addition to the judge’s state base salary for computation of a retirement allowance under this act subtracted from the final average compensation figure used to calculate the judge’s county, city, or district control unit retirement benefit.

    (3) The sum of the final compensation determined for each plan 3 member and the final average compensation figure used as the basis for determining the judge’s retirement allowance as a member of a county retirement plan or a retirement system that was established pursuant to the municipal employees retirement act of 1984, 1984 PA 427, MCL 38.1501 to 38.1555, or that is subject to 1980 PA 443, MCL 38.841 to 38.846, shall not exceed the judge’s total annual salary payable from all sources at the time of his or her retirement.

    (4) For purposes of subsections (1) and (2), the state base salary of a judge of the probate court who is a plan 3 member is equal to the salary paid pursuant to section 821 of the revised judicature act of 1961, 1961 PA 236, MCL 600.821.

    (5) The department or the reporting unit shall deduct the member’s required contribution for participation in the provisions of subsections (1) and (2) and section 504a from the member’s compensation and shall transfer the contributions to the retirement system.