Upon the death of a retired employee, the employee's beneficiary shall be paid (1) the excess of the balance in the employee contribution account of the deceased employee as of the date of the beginning of the employee's pension payments over the sum of the pension payments previously received by the employee, but this amount may not be paid if a joint and survivor option under AS 39.35.450 is in effect or if a surviving spouse's pension under AS 39.35.440 is payable; and
(2) the remaining payments purchased by the balance in the employee savings account of the deceased employee as of the date the employee retired.