105 KAR 1:430. General compliance with federal tax laws

Link to law: http://www.lrc.ky.gov/kar/105/001/430.htm
Published: 2015

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      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.)