If income payments are payable from the state employees retirement system under § 5-165 or § 5-165a to a beneficiary of a member, then the provisions of subsections (a) and (b) of § 5-168 shall not apply to the beneficiary as long as such income payments continue. If the member retired and died prior to August 1, 1986, after the income payments cease, a death benefit shall be payable to the beneficiary in an amount equal to the excess of the member’s retirement contributions and accrued interest over the sum of twenty-five per cent of such income payments made from the state employees retirement system. If the member retires and dies on or after August 1, 1986, after the income payments cease, a death benefit shall be payable to the beneficiary in an amount equal to the member’s retirement contributions and accrued interest reduced by the federal tax exclusion ratio times such income payments made from the state employees retirement system.