(1)    If a participating employee receives temporary disability compensation under s. 102.43 for any period prior to termination of employment with the participating employer which commences on or after April 30, 1980, the employee shall be:

      (a)    Credited with creditable service during that period on the same basis as the employee was credited with creditable service immediately prior to the commencement of the period; and

      (b)    Treated for all purposes of the Wisconsin retirement system, including, but not limited to, contributions and benefits, as having received the amount and rate of earnings the employee would have received if the disability had not occurred, including adjustments in the rate of earnings of the employee made during that period in good faith.

   (2)   Earnings and creditable service determined under sub. (1) shall be reported by the employer to the department. The employer shall pay all employer and required employee contributions payable under this section with respect to the earnings and current service except the employer may recover from the employee’s earnings paid after the employee returns to employment with the employer the amount which the employer paid on behalf of the employee which is customarily actually paid by the employee under s. 40.05 (1). The employer may not deduct the amount recoverable under this subsection from the employee’s earnings at a rate greater than 5 percent of each payment of earnings.