105
KAR 1:140. Employer’s administrative duties.
RELATES
TO: KRS 16.583, 16.645(18), 18A.105, 61.546, 61.552(23), 61.560, 61.565,
61.569, 61.597, 61.598, 61.637(17), 61.675, 61.685, 61.702, 78.545(33), (37),
78.616, 78.625, 78.652, 26 U.S.C. 401(a)(17), (31), 403(b), 408(a), (b),
414(g)(6), 457(b), 3121(b)(10), Pub. L. 104-191, Pub. L. 111-5, Div. A, Title
XIII, Div. B, Title IV, 26 C.F.R. 31.3121(b)(10)-2, 29 C.F.R. 519.2(a), 42
C.F.R. 423.504(b)(4)(vi), 45 C.F.R. Parts 160, 162, 164
STATUTORY
AUTHORITY: KRS 16.645(18), 61.565, 61.645(9)(g), 61.675, 78.545(33), 78.625
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. Employers participating in the
Kentucky Employees Retirement System, County Employees Retirement System and
State Police Retirement System are required by KRS 16.645(18), 61.565, 61.675,
78.545(33), and 78.625 to make contributions to the retirement systems, to
report creditable compensation to the retirement systems and other information
that the Board of Trustees may require, and perform other duties and responsibilities
as participating employers. 26 U.S.C. 401(a)(17) places a limit on the amount
of creditable compensation on which contributions may be made. This
administrative regulation sets out the reporting requirements for all
participating agencies.
Section
1. (1) Each employer shall submit the reports required under KRS 61.675 and KRS
78.625 electronically using the secure Kentucky Retirement Systems’ Employer
Self Service Web site by:
(a)
The Enter Report Details Module; or
(b)
Uploading an electronic file that meets the requirements of the Employer
Contribution Record Layout. The employer shall submit a test file to the
retirement systems, which shall be reviewed for compliance with the
requirements of the Employer Contribution Record Layout. If the test file is in
compliance with the requirements of the Employer Contribution Record Layout,
the retirement systems shall certify the electronic file and inform the
employer of the month when the employer may begin using the electronic file for
submitting reports. If the test file is not in compliance with the requirements
of the Employer Contribution Record Layout, the retirement systems shall inform
the employer of the needed corrections to the test file. The employer shall not
submit a report by electronic file pursuant to this subsection until the test
file is certified by the retirement systems.
(2)
The retirement systems shall notify each employer of the Web address of the
secure Kentucky Retirement Systems’ Employer Self Service Web site and shall notify
each employer if the Web address of the secure Kentucky Retirement Systems’
Employer Self Service Web site changes.
(3)
Each employer shall submit the contributions required by KRS 61.675 and KRS
78.625:
(a)
Electronically using the secure Kentucky Retirement Systems’ Employer Self
Service Web site;
(b)
By mailing or hand delivering a check;
(c)
By the eMARS system maintained by the Finance and Administration Cabinet; or
(d)
By wire transfer.
(4)
The employer shall report all creditable compensation paid during a month by
the tenth day of the following month.
(a)
The employer shall designate the month to which the creditable compensation
should be applied if it is not the month for which the employer is reporting and
if the month the creditable compensation was earned is the month in which the
employee:
1.
Became employed;
2.
Became eligible to participate in one of the systems administered by Kentucky
Retirement Systems;
3.
Was transferred to hazardous coverage from nonhazardous participation;
4.
Was transferred from hazardous coverage to nonhazardous participation;
5.
Terminated from employment; or
6.
Became ineligible to participate in one (1) of the systems administered by
Kentucky Retirement Systems.
(b)
If the employee is paid creditable compensation in a lump sum or nonrecurring
payment, the employer shall designate the reason for the lump sum or
nonrecurring payment.
1.
If the lump sum or nonrecurring payment was earned during a specific time
period, the employer shall designate the time period during which the lump sum
or nonrecurring payment was earned.
2.
If the employer fails to designate a specific time period during which the lump
sum or nonrecurring payment was earned, the payment shall be considered a lump
sum bonus pursuant to KRS 16.505(8), 61.510(13), or 78.510(13).
(5)
The provisions of subsection (1) of this section shall not apply to the
Kentucky Personnel Cabinet or agencies that are reported by the Kentucky
Personnel Cabinet.
(6)
Each employer shall report employees who are regular full-time employees as
defined by KRS 61.510(21) and 78.510(21) and shall remit employer and employee
contributions for those employees.
(7)
If an employer fails to withhold from an employee’s creditable compensation the
full amount of contributions due from the employee in accordance with KRS 16.583,
61.560, 61.597, or 61.702:
(a)
The retirement systems shall notify the employer of the additional amount of
employee contributions due from the employee;
(b)
The employer shall withhold the additional contributions due from the employee
in accordance with KRS 16.583, 61.560, 61.697, or 61.702 from the employee’s
creditable compensation and remit the additional contributions to the retirement
systems;
(c)
If the employee is no longer employed by the employer, the employer shall
notify the retirement systems and the retirement systems shall refund the
contributions submitted by the employer on behalf of the employee to the
employer, which shall withhold the applicable taxes from the contributions and
remit the remaining money to the employee; and
(d)
If the contributions are refunded in accordance with paragraph (c) of this subsection,
then that service credit shall be omitted service in accordance with KRS
61.552(23).
(8)
Each employer shall report employees who are not regular full-time employees as
defined by KRS 61.510(21) and 78.510(21), but shall not remit employer or
employee contributions for those employees unless required to do so pursuant to
KRS 61.680(6), except:
(a)
Student employees of public universities participating in the Kentucky
Employees Retirement System who are enrolled as full-time students in a course
of study at the university and who are exempt from FICA withholding pursuant to
26 U.S.C. 3121(b)(10) and 26 C.F.R. 31.3121(b)(10)-2; and
(b)
Student employees of public universities participating in the Kentucky
Employees Retirement System who are enrolled as full-time students in a course
of study at the university and are classified as full-time students throughout
the fiscal year pursuant to 29 C.F.R. 519.2(a).
(9)(a)
An employer participating in Kentucky Employees Retirement System or County
Employees Retirement System shall not classify an employee in more than one (1)
non-participating position status during the fiscal year, except an employer
participating in the County Employees Retirement System may classify an
employee as probationary pursuant to KRS 78.510(21)(c) in the same fiscal year
that the employer classifies the employee as seasonal, emergency, or part-time.
(b)
An employer participating in the Kentucky Employees Retirement System or the
County Employees Retirement System shall not change an employee’s position
status from full-time to seasonal, temporary, or interim in the same fiscal
year.
(c)
An employer shall not classify an employee as a seasonal employee pursuant to
KRS 61.510(21)(a) or 78.510(21)(a) unless the duties of the job can only be
performed during a defined time period during a fiscal or calendar year. If the
employer classifies an employee as seasonal and the employee is terminated
after the defined time period during a fiscal or calendar year, there shall be
a three (3) calendar month break in employment before the employer may again
classify the employee as a seasonal employee, except for employers that are
school boards. If an employer that is a school board classifies an employee as
seasonal and the employee is terminated after the defined time period during a
fiscal or calendar year, there shall be a six (6) calendar month break in employment
before the employer may again classify the employee as a seasonal employee.
(d)
If an employer violates the provisions of this subsection, the retirement
systems shall determine if the employee worked or averaged the necessary hours
to be in a regular full-time position as provided in KRS 61.510(21) or
78.510(21). If the employee worked or averaged the necessary hours to be in a
regular full-time position as defined by KRS 78.510(21), the service credit
shall be omitted service in accordance with KRS 61.552(23).
Section
2. (1) Each employer shall submit electronic mail to the retirement systems by
logging on to the Kentucky Retirement Systems’ secure electronic mail server.
(2)(a)
If an employer submits personal information about its employees to the
retirement systems in an unsecure electronic format or submits personal
information regarding its employees intended to be submitted to the retirement
systems to another person or entity by hand delivery, mail, fax, or in an
electronic format; the employer shall notify affected employees in writing of
the disclosure of personal information and provide information regarding
obtaining credit reports.
(b)
Personal information includes the member’s first name or first initial and last
name in combination with the member’s:
1.
Social Security number;
2.
Driver’s license number;
3.
Personal Identification Number permitting access to the member’s account; or
4.
Medical Information.
(c)
The retirement systems shall notify the employer of a disclosure upon
discovery.
(d)
The employer shall notify the retirement systems of a disclosure upon
discovery.
(e)
The employer shall submit a draft of the written notification to be made to
affected employees to the retirement systems for approval or denial.
(f)
The employer shall submit copies of the written notifications made to affected
employees to the retirement systems after the notifications have been made.
(g)
If the retirement systems is required by federal or state law to provide
notification to affected members about the employer’s disclosure of personal
information or if the retirement systems determines that it should provide the
notification to its affected members because of the nature or magnitude of the
employer’s disclosure, the employer shall reimburse the retirement systems for
its costs in notifying members affected by the employer’s disclosure.
(h)
In transmitting any medically related personal information, the employer shall
comply with all statutes and regulations comprising the Health Insurance
Portability and Accountability Act of 1996 "HIPAA", Pub.L. 104-191
and the Health Information Technology for Economic and Clinical Health Act
"HITECH", Pub.L. 111-5.
(i)
Each employer shall execute a data use agreement with retirement systems.
Section
3. (1)(a) The retirement systems shall submit an invoice to employers for any
payments owed to the retirement systems, which were not paid through the normal
monthly reports.
(b)
The employer shall remit payment to the retirement systems by the due date
provided on the invoice.
(2)
The retirement systems may offset funds owed by the employer to the retirement
systems with funds owed to the employer by the retirement systems.
Section
4. (1) An employer shall pay interest at the rate adopted by the board for any
creditable compensation paid as a result of an order of a court of competent
jurisdiction, the Personnel Board, or the Human Rights Commission or for any
creditable compensation paid in anticipation or settlement of an action before
a court of competent jurisdiction, the Personnel Board, or the Human Rights
Commission including notices of violations of state or federal wage and hour
statutes or violations of state or federal discrimination statutes.
(2)
The interest shall be assessed from the time period for which the creditable
compensation has been reinstated.
Section
5. If an employer refuses to provide the retirement systems access to records
or information requested in accordance with KRS 61.685 or does not respond to a
request for information or records by the retirement systems, the retirement
systems may, if appropriate, hold all payments of:
(1)
Any funds due to the employer; or
(2)
Refunds or initial retirement allowances to any employee or former employee of
the employer whose refund or retirement may be affected by the records or
information requested by the retirement system.
Section
6. (1) Effective July 1, 1996, and before July 1, 2002, the creditable
compensation on which contributions are reported shall not exceed the maximum annual
compensation limit contained in 26 U.S.C. 401(a)(17), $150,000, as adjusted for
cost-of-living increases under 26 U.S.C. 401(a)(17)(B). The retirement system
shall notify employers of the maximum annual compensation limit. Each employer
shall report contributions on all creditable compensation up to the maximum
annual limit. Once an employee's creditable compensation has reached the
maximum annual limit, the employer shall continue to report the employee's
creditable compensation but shall not report any further employer or employee
contributions on the employee's creditable compensation. If excess
contributions are erroneously reported, the retirement system shall refund the
excess contributions to the employer for distribution to the employee after making
payroll deductions in accordance with federal and state law.
(2)
Effective only for the 1996 plan year, in determining the compensation of an
employee eligible for consideration under this provision, the rules of 26
U.S.C. 414(g)(6) shall apply, except that in applying these rules, the term
"family" shall include only the spouse of the member and any lineal
descendants of the employee who have not attained age nineteen (19) before the
close of the year.
(3)
Effective with respect to plan years beginning on and after July 1, 2002, a
plan member's annual compensation that exceeds $200,000 (as adjusted for
cost-of-living increases in accordance with 26 U.S.C. 401(a)(17)(B)) shall not
be taken into account in determining benefits or contributions due for any plan
year. Annual compensation shall include compensation during the plan year or any
other consecutive twelve (12) month period over which compensation is otherwise
determined under the plan (the determination period). The cost-of-living
adjustment in effect for a calendar year shall apply to annual compensation for
the determination period that begins with or within the calendar year. If the
determination period consists of fewer than twelve (12) months, the annual compensation
limit shall be an amount equal to the otherwise applicable annual compensation
limit multiplied by a fraction, the numerator of which is the number of months
in the short determination period, and the denominator of which is twelve (12).
If the compensation for any prior determination period is taken into account in
determining a plan member's contributions or benefits for the current plan
year, the compensation for this prior determination period shall be subject to
the applicable annual compensation limit in effect for that prior period.
(4)
A participating member may pay contributions for the creditable compensation
over the maximum annual compensation limit for the years used to determine the
member's final compensation for purposes of retirement if:
(a)
The member's creditable compensation has exceeded the maximum annual
compensation limit contained in 26 U.S.C. 401(a)(17) in years prior to the
fiscal year beginning July 1, 2002;
(b)
The member has filed a notification of retirement; and
(c)
The excess creditable compensation is within the maximum annual compensation
limit applicable in 2002-2003. Upon receipt of employee contributions, the
retirement systems shall bill the employer for the employer contributions on
the excess creditable compensation, and the employer shall remit the employer
contributions to the retirement systems. The excess shall only be included in retirement
calculations if both the employee and employer have paid their respective
contributions.
Section
7. (1) An employer may request that the retirement systems make a determination
if a change in position or hiring of an employee is a bona fide promotion or
career advancement prior to the employee’s change of position or hiring as
provided in KRS 61.598.
(2)
An employer may submit a Form 6480, Employer Request for Pre-Determination of
Bona Fide Promotion or Career Advancement, describing the proposed change in
position or hiring of an employee or potential employee including:
(a)
The employee’s or potential employee’s full name;
(b)
The employee’s or potential employee’s Kentucky Retirement Systems Member
Identification Number or Social Security Number;
(c)
The potential employee’s current employer;
(d)
The employee’s current job description;
(e)
The job description for the employee’s proposed job;
(f)
Documentation of additional training, skills, education, or expertise gained by
the employee or potential employee;
(g)
Employer’s organizational chart; and
(h)
Any additional information the employer wants to be considered by the
retirement systems.
(3)
The employer shall provide any additional information requested by the
retirement systems.
(4)
The retirement systems may require the employer to make certifications
regarding the information and documentation submitted.
(5)
In determining if a change in position or hiring would be a bona fide promotion
or career advancement, the retirement systems shall consider the factors listed
in KRS 61.598(1)(a).
(6)
Increases or proposed increases in an employee’s creditable compensation caused
by overtime, compensatory time other than lump-sum payment made at the time of
termination, or bonuses shall not be a bona fide promotion or career
advancement.
(7)
The retirement systems shall issue a final administrative decision in writing informing
the employer whether the employee’s change in position or potential employee’s
hiring is a bona fide promotion or career advancement. The retirement systems’
determination shall be specific to the employee or potential employee and shall
be based on the information and documentation provided by the employer. If the
information or documentation provided by the employer is not accurate, the
final administrative decision of the retirement systems shall not be binding on
the retirement systems pursuant to KRS 61.685.
(8)
An employer who disagrees with the retirement systems’ final administrative
decision may request an administrative hearing in accordance with KRS Chapter
13B. The request for administrative hearing shall be made in writing within
thirty (30) days of the date of the final administrative decision of the
retirement systems.
Section
8. (1) After the member retires, the retirement systems shall determine if annual
increases in a member’s creditable compensation greater than ten (10) percent
occurred over the member’s last five (5) fiscal years of employment.
(a)
For each of the member’s last five (5) fiscal years of employment, the
retirement systems shall multiply the member’s creditable compensation for the
previous fiscal year by 110 percent. If the member’s creditable compensation in
any of his or her last five (5) fiscal years of employment is greater than the
member’s creditable compensation from the previous fiscal year multiplied by
110 percent, the retirement systems shall determine that an annual increase in
the member’s creditable compensation greater than ten (10) percent has
occurred.
(b)
For purposes of performing the calculations in paragraph (a) of this
subsection, the member’s creditable compensation shall be annualized by
dividing the member’s creditable compensation for the fiscal year by the number
of months of service credit, and multiplying by twelve (12).
(2)
If the retirement systems determine that the member received annual increases
in creditable compensation greater than ten (10) percent over the member’s last
five (5) fiscal years of employment, the retirement systems shall send written
notice to the member’s last participating employer of the retirement systems’
determination that the member has experienced annual increases in creditable
compensation greater than ten (10) percent over the member’s last five (5)
fiscal years of employment, and the amount of the additional actuarial cost to
the retirement systems attributable to the increases.
(3)
If the employer believes that the annual increases in creditable compensation
greater than ten (10) percent over the member’s last five (5) fiscal years of
employment was due to a bona fide promotion or career advancement, the employer
shall file a Form 6481, Employer Request for Post-Determination of Bona Fide
Promotion or Career Advancement, for a determination that the annual increases
in creditable compensation greater than ten (10) percent over the member’s last
five (5) fiscal years of employment were due to a bona fide promotion or career
advancement. The Form 6481 shall be filed within sixty (60) days of the date of
the notice. If the retirement systems had previously provided a determination
that a change in position or hiring of the member would be a bona fide
promotion or career advancement, the employer shall submit the determination
and provide documentation that the increase in creditable compensation for that
fiscal year was due to the employer implementing the proposed change in
position or hiring.
(4)
The employer shall provide any additional information requested by the
retirement systems.
(5)
The retirement systems may require the employer to make certifications
regarding the information and documentation submitted.
(6)
In determining if a change in position or hiring was a bona fide promotion or
career advancement, the retirement systems shall consider the factors listed in
KRS 61.598(1)(a).
(7)
The retirement systems shall issue a final administrative decision in writing informing
the employer whether the annual increases in creditable compensation greater
than ten (10) percent over the member’s last five (5) fiscal years of
employment were due to a bona fide promotion or career advancement.
(8)
If the employer fails to submit a Form 6481, Employer Request for Post-Determination
of Bona Fide Promotion or Career Advancement, within sixty (60) days of the
date of the notice, the employer shall pay the additional actuarial cost to the
retirement systems attributable to annual increases in creditable compensation
greater than ten (10) percent over the member’s last five (5) fiscal years of
employment.
(9)
If the employer disagrees with the final administrative decision by the
retirement systems, the employer shall file a written request for an
administrative hearing pursuant to KRS Chapter 13B within thirty (30) days of
the date of the final administrative decision. The hearing shall be limited to
the issue of whether the retirement systems correctly determined that the
annual increases in the member’s creditable compensation greater than ten (10)
percent were not due to a bona fide promotion or career advancement.
(10)
If the employer fails to file a written request for administrative hearing
within thirty (30) days of the date of the final administrative decision, the
employer shall pay the additional actuarial cost to the retirement systems
attributable to annual increases in creditable compensation greater than ten (10)
percent over the member’s last five (5) fiscal years of employment.
(11)
The retirement systems shall issue an invoice to the last participating
employer representing the actuarial cost to the retirement systems attributable
to annual increases in creditable compensation greater than ten (10) percent
over the member’s last five (5) fiscal years of employment. The employer may
request that the retirement systems allow the employer to pay the cost over a
period, not to exceed one (1) year, without interest and the retirement systems
shall establish a payment plan for the employer.
(12)
If the member was employed by more than one (1) participating employer when the
member retired, the actuarial cost to the retirement systems attributable to annual
increases in creditable compensation greater than ten (10) percent over the
member’s last five (5) fiscal years of employment shall be divided equally
among the member’s last participating employers.
(13)
An employer who is required to pay the additional actuarial cost pursuant to
KRS 61.598 shall be treated as a participating employer in the system to which
the employer is required to pay the additional actuarial cost solely for
purposes of making the payment required pursuant to KRS 61.598.
Section
9. Incorporation by Reference. (1) The following material is incorporated by
reference:
(a)
Form 6480, "Employer Request for Pre-Determination of Bona Fide Promotion
or Career Advancement", July 2013; and
(b)
Form 6481, "Employer Request for Post-Determination of Bona Fide Promotion
or Career Advancement", September 2013.
(2)
This material may be inspected, copied, or obtained, subject to applicable
copyright law, at the Kentucky Retirement Systems, Perimeter Park West, 1260
Louisville Road, Frankfort, Kentucky 40601, Monday through Friday, from 8 a.m.
to 4:30 p.m. (18 Ky.R. 922; Am. 1321; eff.
11-8-1991; 21 Ky.R. 1517; eff. 2-8-1995; 22 Ky.R. 1871; eff. 6-6-1996; 31 Ky.R.
382; 699; eff. 11-5-2004; 35 Ky.R. 970; 1719; eff. 2-6-2009; 38 Ky.R. 74; 492;
9-28-2011; 39 Ky.R. 1484; 1872; eff. 4-5-2013; 40 Ky.R. 360; 1090; 1701; eff.
3-7-2014.)
