105 KAR 1:140. Employer’s administrative duties

Link to law: http://www.lrc.ky.gov/kar/105/001/140.htm
Published: 2015

      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.)
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