102 KAR 1:225. General compliance with

federal tax laws.

 

      RELATES

TO: KRS 161.716, 161.600, 161.470, 26 C.F.R., 26 C.F.R. 401(a)(7),(8), (25), 26

U.S.C. 414(d), (p), (u), 26 U.S.C. 401(a), 414(d), 414(p), 414(u), 503(b),

3401(h), 38 U.S.C. 4301-4335

      STATUTORY

AUTHORITY: KRS 161.310(1), 161.716

      NECESSITY,

FUNCTION AND CONFORMITY: KRS 161.310(1) requires the board of trustees to

promulgate administrative regulations for the administration of the funds of

the retirement system and for the transaction of business. KRS 161.716 requires

the board of trustees to promulgate administrative regulations as are necessary

to remove any conflicts with federal laws and to protect the interests of the

members and survivors of the members of the retirement system. Kentucky

Teachers' Retirement System shall administer the Retirement System as a

qualified defined benefit plan pursuant to 26 U.S.C. 401(a) and 26 U.S.C.

414(d) of the Internal Revenue Code, 26 U.S.C., 26 C.F.R., and such other

Internal Revenue Code Sections as applicable. This administrative regulation

establishes Kentucky Teachers' Retirement System's compliance with 26 U.S.C.

401(a) and 503(b) in order for the Kentucky Teachers' Retirement System to

maintain its tax qualified status as a public defined benefit plan. This

administrative regulation also includes provisions intended to comply with the

Heroes Earnings Assistance and Relief Tax Act of 2008, "HEART Act". This

administrative regulation adds provisions that have been required as part of

the determination letter process regarding vested benefits.

 

      Section

1. Compliance with 26 U.S.C. 401(a)(7) and (8) for Vesting and Forfeitures. (1)

A plan member shall be 100 percent vested in the member's accumulated

contributions at all times.

      (2)(a)

In conformity with 26 U.S.C. 401(a)(8), a forfeiture of benefits by a member or

former member of the plan shall not be used to pay benefit increases.

      (b)

Forfeitures shall be used to reduce employer contributions.

      (3)

Upon termination or partial termination of the Kentucky Teachers' Retirement

System, or the complete discontinuance of contributions, a member shall have a

nonforfeitable interest in his accrued benefit to the extent funded.

      (4)

In order to comply with Internal Revenue Service interpretations, subject to

the provisions of KRS 161.470, a member shall have a nonforfeitable interest in

his accrued benefit at attainment of age sixty (60) with the completion of five

(5) years of service.

      (5)

Subject to the provisions of KRS 161.470, a member who completes at least five

(5) years of service and terminates employment shall be vested in his accrued

benefit and shall be entitled to that benefit upon the attainment of normal

retirement age, which is age sixty (60), unless the member withdraws his

accumulated contributions.

 

      Section

2. Compliance with 26 U.S.C. 414(p) for Qualified Domestic Relations Orders. If

benefits are payable pursuant to a qualified domestic relations order that

meets the requirements of a domestic relations order as defined in 26 U.S.C.

414(p), then the applicable requirements of 26 U.S.C. 414(p) shall be followed

by the retirement system.

 

      Section

3. Compliance with 26 U.S.C. 414(u) for Reemployed Veterans. (1) Effective

December 12, 1994, Contributions, benefits, and service credit with respect to

qualified military service shall be governed by 26 U.S.C. 414(u) and the

Uniformed Services Employment and Reemployment Rights Act of 1994, 38 U.S.C.

4301 – 4335.

      (2)

Effective with respect to deaths occurring on or after January 1, 2007, while a

member is performing qualifying military service, as defined in 38 U.S.C.

Chapter 43 to the extent required by section 26 U.S.C. 401(a)(37) of the

Internal Revenue Code, survivors of a member of the Kentucky Teachers'

Retirement System shall be entitled to any additional benefits that the system

would provide if the member had resumed employment and then died, such as

accelerated vesting or survivor benefits that are contingent on the member's

death while employed.

      (3)

Beginning January 1, 2009, to the extent permitted by 26 U.S.C. 3401(h) and

414(u)(2) of the Internal Revenue Code, an individual receiving differential

wage payments (while the individual is performing qualified military service,

as defined in 38 U.S.C. Chapter 43) from an employer shall be treated as

employed by that employer and the differential wage payment shall be treated as

annual compensation. This provision shall be applied to all similarly situated

individuals in a reasonably equivalent manner.

 

      Section

4. Compliance with 26 U.S.C. 503(b) for Prohibited Transactions. The board

shall not engage in a transaction prohibited by 26 U.S.C. 503(b).

 

      Section

5. Compliance with 26 U.S.C. 401(a)(25) for Actuarial Assumptions. (1) Kentucky

Teachers' Retirement System shall comply with 26 U.S.C. 401(a)(25) to determine

the amount of any benefit that is determined on the basis of actuarial

assumptions using assumptions adopted by the board by resolution for specific

benefit calculation purposes.

      (2)

These benefits shall not be subject to employer discretion. (35 Ky.R. 1943; 2403;

eff. 6-5-2009; 36 Ky.R. 1967; eff. 6-4-2010; 37 Ky.R. 1322; 1964; eff. 3-1-2011;

39 Ky.R. 1050; 1371; eff. 2-1-2013.)