105 KAR 1:430. General compliance with
federal tax laws.
RELATES TO: KRS
16.505-16.652, 61.510-61.705, 78.510-78.852, 26 U.S.C. 401(a)(7), (8), (25),
414(d),(p),(u), 503(b), Pub.L. 110-245
STATUTORY
AUTHORITY: KRS 61.645(9)(g)
NECESSITY,
FUNCTION, AND CONFORMITY: KRS 61.645(9)(g) requires the Board of Trustees of
the Kentucky Retirement Systems to promulgate administrative regulations
necessary or proper in order to carry out the provisions of KRS 16.505 to
16.652, 61.510 to 61.705, and 78.510 to 78.852 and to conform to federal
statutes and regulations. This administrative regulation establishes Kentucky
Retirement Systems' compliance with 26 U.S.C. 401(a), 26 U.S.C. 414, Pub. L.
No. 110-245, and 26 U.S.C. 503(b) in order for Kentucky Employees Retirement
System, State Police Retirement System, and County Employees Retirement System
to maintain their tax qualified status as public defined benefits plans.
Section 1.
Compliance with 26 U.S.C. 401(a)(7) and 401(a)(8) for Vesting and Forfeitures.
(1) A plan member shall be 100 percent vested in the member’s accumulated
contributions at all times.
(2) In
conformity with 26 U.S.C. 401(a)(8), any forfeitures of benefits by members or
former members of the plan shall not be used to pay benefit increases. However,
these forfeitures shall be used to reduce employer contributions.
(3) Upon
termination or partial termination of an affected retirement system, or the
complete discontinuance of contributions, a member shall have a nonforfeitable
interest in his accrued benefit to the extent funded except as provided by KRS
16.652, 61.692, and 78.852.
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), 26 U.S.C. 401(a)(37), and Pub. L. No. 110-245
for Reemployed Veterans.
(1) Effective
December 12, 1994, notwithstanding any other provision of the retirement system
law; 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.
(2) For deaths occurring on or after January 1, 2007, that occur
while a member is performing qualified military service (as defined in 38
U.S.C. 43), to the extent required by 26 U.S.C. 401(a)(37), survivors of a
member in a State or local retirement or pension system are 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. In any event, a deceased
member's period of qualified military service shall be counted for vesting
purposes.
(3) Beginning January 1, 2009, to the extent required by
26 U.S.C. 414(u)(12), an individual receiving differential wage payments as
defined in 26 U.S.C. 3401(h)(2) from an employer shall be treated as employed
by that employer, and the differential wage payment shall be treated as
compensation for purposes of applying the limits on annual additions under 26
U.S.C. 415(c). 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. Effective as of July 1, 1989, 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. Kentucky
Retirement Systems shall determine the amount of any benefit that is determined
on the basis of actuarial assumptions using assumptions adopted by the board by
rule; these benefits shall not be subject to employer discretion.
Section 6. (1) In
addition to any other vesting provisions under state law, except as provided in
KRS 61.535, the normal retirement benefit of a member with nonhazardous service
in the Kentucky Employees Retirement System or the County Employees Retirement
System shall be nonforfeitable upon the later of:
(a) The
attainment of age sixty-five (65), which is the normal retirement age;
(b) For a
member whose membership date is on or before August 31, 2008, the completion of
four (4) years of service; or
(c) For a
member whose membership date is on or after September 1, 2008, five (5) years
of service earned pursuant to KRS 16.543(1), 61.543(1), or 78.615(1).
(2) In addition
to any other vesting provisions under state law, except as provided in KRS
61.535, the normal retirement benefit of a member of the State Police
Retirement System and a member with hazardous service in the Kentucky Employees
Retirement System or the County Employees Retirement System shall be
nonforfeitable upon the later of:
(a) For a
member whose membership date is on or before August 31, 2008:
1. Attainment
of age fifty-five (55), which is the normal retirement age; or
2. The
completion of five (5) years of service; or
(b) For a
member whose membership date is on or after September 1, 2008:
1. Attainment
of age sixty (60), which is the normal retirement age; or
2. The
completion of five (5) years of service earned pursuant to KRS 16.543(1),
61.543(1), or 78.615(1). (35 Ky.R. 980; Am. 1730; eff. 2-6-09; 39 Ky.R. 74;
753; 10-24-12.)