34 TAC §§87.1, 87.3, 87.5, 87.9, 87.15, 87.17, 87.19, 87.33
The Employees Retirement System of Texas (ERS) proposes amendments
to 34 Texas Administrative Code §§87.1, 87.3, 87.5, 87.9, 87.15,
87.17, 87.19, and 87.33 concerning the Deferred Compensation Plan as established
in Tex. Gov't Code Chapter 609. All referenced Sections include changes required
due to the Internal Revenue Service's (IRS) Revenue Procedure 2004-56
The amendments to §§87.1 through 87.33 are needed to update the
plan rules, to clarify plan requirements, and to comport with federal law
and administrative requirements, including new IRS regulations.
Section 87.1 revises certain definitions due to changes in those federal
regulations and model provisions in the Rev. Proc. 2004-56.
Sections 87.3, 87.5 and 87.33 changes adjust the annual deferral limit
to $14,000 for 2005, per federal law. Section 87.3(c)(8) includes new information
on non-assignability of participant or beneficiary accounts.
Section 87.5(g) adjusts the over age 50 catch-up limits to $4,000 for 2005,
per federal law. Other changes in Section 87.5 include amendments recommended
by Rev. Proc. 2004-56 regarding participant deferrals, disability, and military
time.
Section 87.9 clarifies the identity of participants that will be contacted
by the plan administrator to submit a prior funds transfer form for the disposition
of deferrals and investment income.
Section 87.15(d)(3)(A) has minor modifications to conform to IRS model
amendments on plan to plan transfers and references the Income Tax Regulations.
Sections 87.17(a) - (e) and 87.33(g) changes clarify the purchase of service
credit within the same state or another state, and allow service purchase
through ERS, the Teacher Retirement System of Texas, the Judicial Retirement
System of Texas Plan I or Plan II or any other retirement plan. In addition,
Section 87.17 includes reference to the Income Tax Regulations and clarifies
distribution requirements, including qualified domestic relations orders,
unforeseeable emergencies, one-time elections, and loans. Section 87.17 revised
the wording on dependent, which was clarified due to the amended §152(a)
of the Internal Revenue Code and the Working Families Tax Relief Act of 2004.
Section 87.19 changes require plan vendors to report by the 5th of September,
rather than 15th of September for the special end of the fiscal year (August
31st) report.
Section 87.33 clarifies the purchase of service credit to comply with revisions
in Rev. Proc. 2004-56.
The above changes are required to clarify plan requirements, and to comply
with federal law and regulations.
Ms. Paula A. Jones, General Counsel, Employees Retirement System of Texas,
has determined that for the first five year period the rules are in effect,
there will be no fiscal implications for state or local government as a result
of enforcing or administering the rules, and, to her knowledge, small businesses
should not be affected. Ms. Jones also determined that for each year of the
first five years the rules are in effect the public benefit anticipated as
a result of enforcing the rules would be added flexibility for and protection
of State of Texas Deferred Compensation Plan participants so that the plan
complies with revised federal tax regulations and requirements.
Comments on the proposed rule amendments may be submitted to Paula A. Jones,
General Counsel, Employees Retirement System of Texas, P.O. Box 13207, Austin,
Texas 78711-3207, or you may email Ms. Jones at pjones@ers.state.tx.us. The
deadline for receiving comments is April 18, 2005, at 10:00 a.m.
The amendments are proposed under Government Code, §609.508,
which provides authorization for the ERS Board of Trustees to adopt rules
necessary to administer the deferred compensation plan.
No other statutes are affected by these proposed amendments.
§87.1.Definitions.
The following words and terms, when used in this chapter, shall have
the following meanings, unless the context clearly indicates otherwise.
(1)
Account--A record that a prior plan vendor or revised plan
vendor uses to
record the value of the deferred compensation activity
credited to the participant, including annual deferrals, earnings or investment
losses, transfers and any distributions made to a participant or on behalf
of the participant's beneficiary
[
account for deferrals and investment
income on a participant-by-participant basis
].
(2)
Agency coordinator--An employee of a state agency who has
been designated by the agency to perform certain administrative functions
with respect to the plan.
(3)
Basic pension plan--The retirement program in which an
employee must participate.
(4)
Beneficiary--The designated
person (or if none, the participant's estate) who is entitled to receive benefits
under the plan after the death of a participant.
(5)
[
(4)
] Beneficiary designation form--A
form authorized and approved by the plan administrator to designate a participant's
beneficiary.
(6)
[
(5)
] Board of Trustees--The Board
of Trustees of the Employees Retirement System of Texas.
(7)
[
(6)
] Call-in day--The first five
working days of the month.
(8)
[
(7)
] Change agreement--A contract
signed by a participant to request certain changes concerning the participant's
deferrals, investment income, and participation in the plan.
(9)
Code--The Internal Revenue
Code of 1986, as now in effect or as hereafter amended. All citations to sections
of the Code are to such sections as they may from time to time be amended
or renumbered.
(10)
[
(8)
] Data collection center--A
private entity used by the State Treasury Department to collect information
from state depositories regarding deposits of state funds.
(11)
[
(9)
] Day--A calendar day.
(12)
[
(10)
] DCP--Deferred compensation
plan.
(13)
[
(11)
] Deferral--The amount of compensation
a participant has agreed to defer under the plan.
(14)
[
(12)
] Distribution agreement--A
contract signed by a participant or beneficiary indicating the disposition
of the participant's deferrals and investment income.
(15)
[
(13)
] Disclosure form--A document
completed by a prior plan vendor's representative and signed by the vendor
representative disclosing the rate of return, fees, withdrawal penalties,
and payout options for the qualified investment product selected.
(16)
Eligible rollover distribution--Any
distribution of all or any portion of a participant's account balance, including
an individual retirement account described in §408(a) of the Code, an
individual retirement annuity described in §408(b) of the Code, a qualified
trust described in §401(a) of the Code, an annuity plan described in §403(a)
or 403(b) of the Code, that accepts the rollover distribution, except that
an eligible distribution does not include:
(A)
any installment payment for a period of 10 years or more;
(B)
any distribution as a result of an unforeseeable emergency;
or
(C)
for any other distribution, the portion, if any, of the
distribution that is required under §401(a)(9).
(17)
[
(14)
] Emergency withdrawal application--A
form completed by a participant requesting the full or partial distribution
of the participant's deferrals and investment income because of a unforeseeable
emergency.
(18)
[
(15)
] Employee--A person who provides
services as an officer or employee to a state agency.
(19)
[
(16)
] Executive director--The executive
director of the Employees Retirement System of Texas.
(20)
[
(17)
] FDIC--The Federal Deposit
Insurance Corporation or its successor in function. The FDIC consists of two
funds, the Savings Association Insurance Fund (SAIF), which insured savings
associations and savings banks, and the Bank Insurance Fund (BIF), which insures
commercial banks.
(21)
[
(18)
] Fee--The term includes a
fee, penalty, charge, assessment, market value adjustment, forfeiture, or
service charge.
(22)
[
(19)
] Gross income--The total of:
(A)
the value of salary or wages;
(B)
plus the value of longevity pay, hazardous duty pay, imputed
income, special duty pay, sick, vacation, back pay and benefit replacement
pay; and
(C)
minus the present value of contributions to the Employees
Retirement System, the Teacher Retirement System, the Optional Retirement
Program, and the TexFlex program administered by the Employees Retirement
System.
(23)
[
(20)
] Home office--The primary
location at which a prior plan vendor maintains its files and other records
concerning the vendor's participation in the plan and the participants whose
deferrals and investment income have been invested in the vendor's qualified
investment products. The term is usually equivalent to the vendor's headquarters.
(24)
[
(21)
] Inactive prior plan vendor--A
prior plan vendor is an inactive prior plan vendor if no new deferrals have
been invested in any of the vendor's qualified investment products for 12
consecutive months.
[
(22)
Includes--A term of enlargement
and not of limitation or exclusive enumeration. The use of the term does not
create a presumption that components not expressed are excluded.]
(25)
[
(23)
] Includible compensation--
An employee's actual wages in box 1 of Form W-2 for a year for services and
compensation
[
Compensation
] from a state agency that is includible
in a participant's gross income under
§401(a)(17) of
the [
Internal Revenue
] Code
and increased (up to the dollar maximum)
by any compensation reduction election under §125, §132(f), §401(k), §403(b)
or §457(b) of the Code
[
of 1986 as amended, the Economic Growth
and Tax Relief and Reconciliation Act of 2001 (referred to as "EGTRRA"), the
Job Creation and Worker Assistance Act of 2002, and the final IRC §457
regulations.
]
(26)
[
(24)
] Investment income--The interest,
capital gains, and other income earned through the investment of deferrals
in qualified investment products.
(27)
[
(25)
] Investment product--The term
includes a life insurance product, fixed or variable rate annuity, stable
value account, mutual fund, certificate of deposit, money market account,
self-directed brokerage account, or passbook savings account. An investment
product that is in any respect different from another investment product of
the same vendor is a different investment product.
(28)
[
(26)
] Investment provider--a prior
plan vendor or revised plan vendor that offers an investment product in the
plan.
(29)
[
(27)
] NCUA--National Credit Union
Administration, a United States Government Agency, which regulates, charters
and insures deposits of the nation's federal credit unions. Shares and deposits
in credit unions are insured by the NCUSIF as detailed in this section.
(30)
[
(28)
] NCUSIF--National Credit Union
Share Insurance Fund, is administered by the NCUA as detailed in this section
and insures members' share and deposit accounts at federally insured credit
unions.
(31)
[
(29)
] Non-filer--A prior plan vendor
which does not ensure that the plan administrator receives a quarterly report
by the due date specified in §87.19(d)(1) of this title (relating to
reporting and recordkeeping by prior plan vendors).
(32)
[
(30)
] Non-spousal beneficiary--Any
beneficiary other than a spouse or ex-spouse.
(33)
Normal retirement age--A range
of ages beginning with the earliest age at which a person is eligible to retire
under the participant's basic pension plan as referenced in §87.5(g)
of this title (relating to participation by employees).
(34)
[
(31)
] One-time election form--A
form completed by a participant requesting the full distribution of deferred
compensation funds with a total balance that does not exceed the dollar limit
under
the
[
Internal Revenue
] Code [
of 1986 as amended,
] §457(e)(9)
,
[
and
] EGTRRA,
or the dollar
limit under §411(a)(11) of the Code, if greater, as of the date that
payments commence
[
as of the date of the election.
]
Also known as the de minimis distribution election.
(35)
[
(32)
] Participant--A current, retired,
or former employee who either has elected to defer a portion of the employee's
current compensation
, previously deferred compensation
or has a
balance in the plan.
(36)
[
(33)
] Participation agreement--A
contract signed by an employee agreeing to defer the receipt of part of the
employee's compensation in accordance with the plan and containing certain
information regarding prior plan vendors, investment products, and other matters.
(37)
[
(34)
] Plan--The deferred compensation
program of the State of Texas that is governed by the [
Internal Revenue
] Code [
of 1986 as amended,
] §457 [
and EGTRRA,
] and authorized by Chapter 609, Government Code. This plan is a continuation
of the plan previously administered by the Comptroller of Public Accounts.
(38)
[
(35)
] Plan administrator--The Board
of Trustees of the Employees Retirement System of Texas or its designee.
(39)
[
(36
] Prior plan--Refers to the
State of Texas 457 Deferred Compensation Plan, the vendors and products approved
by the Board of Trustees of the Employees Retirement System of Texas prior
to September 1, 2000.
(40)
[
(37)
] Prior plan vendor--A vendor
in the prior plan with whom the plan administrator has signed a vendor contract.
The term includes a prior plan vendor's officers and employees. The prior
plan vendor may be an insurance company, bank, savings and loan, credit union,
or mutual fund. The term applies only to vendors approved and implemented
by the Board of Trustees before January 1, 2000.
(41)
[
(38)
] Product approval notice--A
written notice from the plan administrator to a prior plan vendor informing
the vendor that a particular investment product has been approved for participation
in the plan.
(42)
[
(39)
] Product contract--A contract
between an investment provider and the plan administrator concerning the participation
of one of the vendor's investment products in the plan.
(43)
[
(40)
] Product type--A categorization
of an investment product according to its relevant characteristics. Examples
of product types are life insurance products, mutual funds, certificates of
deposit, savings accounts, share accounts, stable value account, self-directed
brokerage account, and annuities.
(44)
[
(41)
] Qualified investment product--An
investment product concerning which the plan administrator and the sponsoring
prior plan or revised plan vendor have signed a product contract.
(45)
[
(42)
] Revised plan--Refers to the
State of Texas 457 Deferred Compensation Plan and the vendors and products
approved by the Board of Trustees of the Employees Retirement System of Texas
after August 31, 2000 for the Texa$aver program. The term "Texa$aver program"
is used as it is defined in Texas Government Code Section 609.502.
(46)
[
(43)
] Revised plan vendor--An insurance
company, brokerage firm, or mutual fund distributor that sells investment
products in the revised plan. The term includes a vendor's officers and/or
employees. This applies only to vendors approved and implemented by the Board
of Trustees subsequent to December 31, 1999.
(47)
[
(44)
] Separation from service--A
termination of the employment relationship between a participant and the participant's
employing state agency, as determined in accordance with the agency's established
practice. The term excludes a paid or unpaid leave of absence.
(48)
[
(45)
] Spousal beneficiary--The
current or ex-spouse of a participant who is designated to receive a participant's
account balance.
(49)
[
(46)
] State agency--A board, commission,
office, department, or agency in the executive, judicial, or legislative branch
of state government. The term includes an institution of higher education
as defined by the Education Code, §61.003, other than a public junior
college.
(50)
[
(47)
] Third Party Administrator
(TPA)--An entity under the direction of the
plan administrator
[
Plan Administrator
] that operates independently of both the employer
and investment providers to perform agreed upon administrative services to
a tax-deferred defined contribution plan. These tasks may include recordkeeping,
preparation of participant statements, monitoring deferral limits, and other
specified services.
(51)
[
(48)
] Transfer--The redemption
of deferrals and investment income from a qualified investment product for
investment in another qualified investment product.
(52)
[
(49)
] Trust--The deferred compensation
trust fund established to hold and invest deferrals and investment income
under the plan for the exclusive benefit of participants and their beneficiaries.
(53)
[
(50)
] Trustee--The Board of Trustees
of the Employees Retirement System of Texas.
(54)
Unforeseeable emergency distribution--A
severe financial hardship of the participant resulting from: an illness or
accident, loss of property due to casualty, funeral expenses or other extraordinary
and unforeseeable circumstances arising as a result of events beyond the control
of the participant.
(55)
Valuation date--A point in
time in which an asset is assigned a dollar value. It may be the designated
time of closing (daily, last day of the calendar month, the last day of the
calendar quarter, each December 31) for determination of account balances
in a defined contribution plan.
(56)
[
(51)
] Vendor contract--A contract
between the plan administrator and an investment provider concerning the vendor's
participation in the plan.
(57)
[
(52)
] Vendor representative--An
agent, independent agent, independent contractor, or other representative
of a prior plan who is not an employee or officer of the vendor.
(58)
[
(53)
] 401(a)(9), §401(a)(9)
and Section 401(a)(9)--These terms refer to Internal Revenue Code §401(a)(9).
(59)
[
(54)
] 457, §457 and Section
457--These terms refer to Internal Revenue Code §457.
§87.3.Administrative and Miscellaneous Provisions.
(a)
Plan administrator.
(1)
The plan administrator shall administer all aspects of
the plan.
(2)
The plan administrator shall:
(A)
act for the state in all administrative matters concerning
the plan;
(B)
adopt and amend rules that are consistent with state and
federal law;
(C)
enter into necessary contracts; and
(D)
take whatever action is necessary to ensure compliance
with state and federal law and the sections in this chapter.
(b)
Participation by state agencies in the plan.
(1)
Commencing participation in the plan.
(A)
A state agency may commence participation in the plan by:
(i)
sending a written notice from its head of agency to the
plan administrator; and
(ii)
complying with the plan administrator's documentary, training,
and other requirements for participation in the plan.
(B)
The plan administrator may determine the effective date
of a state agency's participation in the plan.
(C)
If the plan administrator does not determine the effective
date in accordance with subparagraph (B) of this paragraph, this subparagraph
applies.
(i)
If the plan administrator receives the written notice on
the first day of a month, then the state agency's participation in the plan
is effective on the first pay date of the following month.
(ii)
Otherwise, the state agency's participation in the plan
is effective on the first pay date of the second month following the month
in which the plan administrator receives the notice.
(2)
Terminating participation in the plan.
(A)
Voluntary termination.
(i)
A state agency may terminate its participation in the plan
by sending a written notice from its head of agency to the plan administrator.
(ii)
If the plan administrator receives the notice on the first
day of a month, then the state agency's participation in the plan terminates
on the first pay date of the third month following the month in which the
plan administrator receives the notice. Otherwise, the state agency's participation
in the plan terminates on the first pay date of the fourth month following
the month in which the plan administrator receives the notice.
(iii)
A state agency's termination of its participation in
the plan does not entitle the agency's participants to a distribution of their
deferrals and investment income.
(iv)
A participant who is employed by a state agency that has
terminated its participation in the plan may not make additional deferrals
until either the agency resumes participating in the plan or the participant
becomes employed by a state agency participating in the plan.
(v)
The agency coordinator of a state agency that has terminated
its participation in the plan is not relieved from the responsibilities set
forth in the sections in this chapter, except to the extent that the agency's
participants will not be making additional deferrals to the plan.
(B)
Involuntary termination or suspension.
(i)
The plan administrator may terminate or suspend a state
agency's participation in the plan if the agency or the agency's coordinator
violates the sections in this chapter.
(ii)
The plan administrator may determine the length of a suspension
after considering all relevant circumstances.
(iii)
The plan administrator may reinstate a state agency that
has been terminated from participation in the plan if the plan administrator
determines that the best interests of the plan would be served.
(iv)
If the plan administrator terminates or suspends a state
agency's participation in the plan, the agency's participants are not entitled
to a distribution of their deferrals and investment income by virtue of the
termination or suspension.
(v)
The participant of a state agency that the plan administrator
has terminated or suspended from participation in the plan may not make additional
deferrals until the plan administrator reinstates the agency, the suspension
ends, or the participant becomes employed by a state agency participating
in the plan.
(vi)
The agency administrator of a terminated or suspended
state agency is not relieved from the responsibilities set forth in the sections
in this chapter, except to the extent that the agency's participants will
not be making additional deferrals to the plan.
(3)
Agency coordinators. An agency coordinator's responsibilities
may include:
(A)
maintaining records concerning each participant as required
by the plan administrator;
(B)
keeping participation agreements on file;
(C)
retaining the original copies of insurance policies and
annuity contracts;
(D)
ensuring that deferrals are properly deducted from a participant's
salary and sent to the appropriate entity as directed by the plan administrator;
(E)
monitoring the annual deferral limits for each plan participant
to ensure the maximum annual deferral limit of the lesser of
$14,000
[
$13,000
] (as adjusted) or 100% of the participant's gross
income is not exceeded;
(F)
calculating and monitoring catch-up limits and furnishing
the plan administrator with the applicable catch-up forms;
(G)
ensuring that all forms and other paperwork are properly
completed and forwarded to the appropriate party;
(H)
balancing participant records and reconciling those records
with the data provided by the prior plan vendors and the plan administrator;
(I)
informing employees and participants about the plan, including
the necessity to file distribution agreements in accordance with §87.17
of this title (relating to Distributions);
(J)
acting as a buffer between employees and participants on
the one hand and prior plan vendors on the other, although an agency coordinator
is prohibited from providing investment advice;
(K)
attempting to locate missing participants and beneficiaries
in accordance with §87.17(q) of this title;
(L)
assisting a participant who has retired or left state employment
if the participant's last position in state government was with that particular
agency that employs the agency coordinator;
(M)
continuing to assist a participant with all deferred compensation
matters if a participant transfers from a participating state agency to a
non-participating state agency until the participant returns to a different
participating agency;
(N)
assisting the beneficiary of a participant whose last position
in state government was with that particular state agency that employs the
agency coordinator;
(O)
notifying the plan administrator when a participant dies
or separates from service; and
(P)
performing any other duties specified in the sections in
this chapter.
(c)
Miscellaneous provisions.
(1)
The participation in the plan of an investment provider
or TPA, qualified investment product, state employee, vendor representative,
or employee of a prior or revised plan vendor is subject to changes in federal
law, federal regulations, state law, and the sections in this chapter.
(2)
The fiscal year of the plan begins on January 1 of each
year.
(3)
The mailing address of the plan administrator is: Plan
Administrator, Deferred Compensation §457 Plan, Employees Retirement
System of Texas, P.O. Box 13207, Austin, Texas 78711-3207.
(4)
If a provision in the sections in this chapter conflicts
with a federal law, rule, or regulation governing the plan, then the law,
rule, or regulation prevails over the provision.
(5)
The participation of an employee in the plan does not give
the employee a legal or equitable right against the participant's employing
state agency, the plan administrator, or the State of Texas except as provided
in the sections in this chapter. The plan does not affect the terms of employment
between a participant and the participant's employing state agency.
(6)
If a time limit is expressed in terms of a number of days
and the last day of the time limit falls on a weekend or holiday recognized
by the State of Texas for observance by state employees, the last day of the
time period is the first business day after the weekend or holiday.
(7)
The sections in this chapter prevail over any document
used in the administration of the plan that has provisions or requirements
which conflict with the sections.
(8)
The interests of each participant
or beneficiary under the plan are not subject to the claims of the participant's
or beneficiary's creditors; and neither the participant nor any beneficiary
shall have any right to sell, assign, transfer, or otherwise convey the right
to receive any payments hereunder or any interest under the plan, which payments
and interest are expressly declared to be non-assignable and non-transferable.
This rule is applicable as referenced in §87.17(e)(7) of this title (relating
to distributions by employees) for qualified domestic relations orders.
§87.5.Participation by Employees.
(a)
Benefits of participation. The plan administrator shall
cease to accept deferrals to investment products approved under the prior
plan, with exception of life insurance products on or after September 1, 2000.
Subject to any changes in federal law:
(1)
a participant's deferrals are not subject to federal income
taxation until the deferrals are paid or otherwise made available to the participant;
and
(2)
investment income is not subject to federal income taxation
until it is paid or otherwise made available to the participant.
(b)
Enrollment of participants in the plan.
(1)
An employee may complete a participation agreement, enroll
online or enroll through customer service representative at the TPA in the
revised plan.
(2)
If a participant has not selected an investment product
to receive deferrals, the deferrals shall be invested in a product selected
by the plan administrator at its sole discretion.
(c)
Effective date of enrollment. A participant's enrollment
in the Plan is effective for compensation earned beginning with the month
following the month in which the participant enrolls.
(d)
Eligibility. Employees are
eligible to participate in the plan and defer compensation immediately upon
becoming employed by a state agency.
(e)
[
(d)
] Contents of a participation
agreement used in the prior plan. A participation agreement must contain but
shall not be limited to:
(1)
the participant's consent for payroll deductions equal
to the amount of deferrals during each pay period;
(2)
the amount that will be deducted from the participant's
compensation during each pay period;
(3)
the prior plan vendor and qualified investment product
in which the participant's deferrals will be invested;
(4)
the date on which the payroll deductions will begin or
end, as appropriate;
(5)
the signature of an individual with authority to bind the
prior plan vendor;
(6)
the signature of an individual with authority to bind the
participant; and
(7)
an incorporation by reference of the requirements of state
law and the sections in this chapter.
(f)
[
(e)
] Participants with existing
life insurance products.
(1)
This paragraph is effective until December 31, 1998. When
a participant has deferrals and investment income in a life insurance product,
the State of Texas:
(A)
retains all of the incidents of ownership of the life insurance
product;
(B)
is the sole beneficiary of the life insurance product;
(C)
is not required to transfer the life insurance product
to the participant or the participant's beneficiary; and
(D)
is not required to pass through the proceeds of the product
to the participant or the participant's beneficiary.
(2)
This paragraph is effective January 1, 1999, and thereafter.
When a participant has deferrals and investment income in a life insurance
product, the life insurance product shall be held in trust for the exclusive
benefit of the participant and beneficiaries.
(g)
[
(f)
] Normal maximum amount of deferrals.
(1)
The amount a participant defers during each tax year may
not exceed the normal maximum amount of deferrals.
(2)
The normal maximum amount of deferrals is equal to the
lesser of
$14,000
[
$13,000
] (as periodically adjusted
for cost-of-living
in accordance with [
Internal Revenue
]
Code §457(e)(15)),
§415(d),
[
EGTRRA
] and the
Job Creation and Worker Assistance Act of 2002, or 100% of a participant's
includible compensation.
(3)
The participant's employing agency will monitor the annual
deferral limits for each plan participant to ensure the maximum annual deferral
limit of the lesser of
$14,000
[
$13,000
] (as adjusted)
or 100% of a participant's gross income is not exceeded.
Each participant
enrolling in the plan must provide the employing state agency any information
necessary to ensure compliance with plan requirements, including, without
limitation, whether the employee is a participant in any other eligible plan.
If a participant makes deferrals in excess of the normal maximum annual
deferral limit and is not participating under the catch-up provision, the
following actions will be taken.
(A)
Upon notification by the participant's agency, the prior
plan vendor or TPA will return to the participant's agency the amount of deferrals
in excess of the normal plan limits, that is, the lesser of
$14,000
[
$13,000
] (as adjusted) or 100% of the participant's gross income without
any reduction for fees or other charges.
(B)
Upon receipt of the funds, the participant's agency will
reimburse the participant through its payroll system.
(4)
If any deferral (or any portion
of a deferral) is made to the plan by a good faith mistake of fact, then within
one year after the payment of the deferral, and upon receipt in good order
of a proper request approved by the plan administrator, the amount of the
mistaken deferral (adjusted for any income or loss in value, if any, allocable
thereto) shall be returned directly to the participant or, to the extent required
or permitted by the plan administrator, to the participant's employing state
agency.
(5)
Disregard excess deferral.
A participant is treated as not having deferred compensation under a plan
for a prior taxable year to the extent excess deferrals under the plan are
distributed, as described in (g)(4). To the extent that the combined deferrals
for pre-2002 years exceeded the maximum deferral limitations, the amount is
treated as an excess deferral for those prior years.
(h)
[
(g)
] Three-year catch-up exception
to the normal maximum amount of deferrals.
(1)
This subsection provides a limited exception to the normal
maximum amount of deferrals.
(2)
In the event that a participant chooses to begin the three-year
catch-up option, the participant is required to complete and provide the plan
administrator with a copy of the three-year catch-up provision agreement form.
(3)
In this subsection, the term "normal retirement age" for
any participant means a range of ages:
(A)
beginning with the earliest age at which a person may retire
under the participant's basic pension plan:
(i)
without an actuarial or similar reduction in retirement
benefits; and
(ii)
without the state's consent for the retirement; and
(B)
ending at age 70.5.
(C)
A participant who is a police officer or firefighter (defined
in [
Internal Revenue
] Code §415(b)), may designate a normal
retirement age that is earlier than that described above, but in any event
may not be earlier than age 40.
(4)
If a participant works beyond age 70.5, the normal retirement
age for the participant is the age designated by the participant
,
which,
in this instance, may not be later than the participant's separation from
service.
(5)
For any or all of the last three full taxable years ending
before the taxable year in which a participant attains normal retirement age,
the maximum amount that the participant may defer for each tax year is the
lesser of:
(A)
twice the annual 457(g) deferral limit as adjusted, or
(B)
the sum of
:
[
the normal maximum amount
of deferrals that the participant did not use in prior tax years commencing
January 1, 1979, provided the participant was eligible to participate in the
plan during those years.
]
(i)
the normal maximum amount of
deferrals for the current year plus each prior calendar year beginning after
December 31, 2001, during which the participant was an employee under the
plan, minus the aggregate amount of compensation that the participant deferred
under the plan during such years, plus
(ii)
the normal maximum amount
of deferrals that the participant did not use in prior tax years commencing
December 31, 1978 and before January 1, 2002, provided the participant was
eligible to participate in the plan, minus the aggregate contributions to
pre-2002 coordination plans during those years.
(6)
The participant's employing agency will calculate and monitor
all three-year catch-up limits and furnish the plan administrator with the
applicable three-year catch-up forms. If a participant makes deferrals in
excess of the participant's three-year catch-up limit, the following actions
will be taken.
(A)
Upon notification by the participant's agency, the prior
plan vendor or TPA will return to the participant's agency, the amount of
deferrals in excess of the three-year catch-up limit without any reduction
for fees or other charges.
(B)
Upon receipt of the funds, the participant's agency will
reimburse the participant through its payroll system.
(7)
This subsection applies only if the participant has not
previously used the three-year catch-up exception with respect to a different
normal retirement age under the plan or another deferred compensation plan
governed by the [
Internal Revenue
] Code [
of 1986 as amended,
] §457 [
and EGTRRA
].
(8)
If a participant makes deferrals in excess of the normal
plan limits under the three-year catch-up provision during or after the calendar
year in which the participant reaches normal retirement age, the following
actions will be taken.
(A)
Upon notification by the participant's state agency, the
prior plan vendor or TPA will return to the participant's state agency, the
amount of deferrals in excess of the normal plan limits, that is, the lesser
of
$14,000
[
$13,000
] (as adjusted in accordance with
[
Internal Revenue
] Code §457(e)(15) or 100% of a participant's
includible compensation) without any reduction for fees or other charges.
(B)
Upon receipt of the funds, the participant's state agency
will reimburse the participant through its payroll system.
(9)
Over age 50 catch-up. A participant age 50 or older during
any calendar year shall be eligible to make additional pre-tax contributions
in accordance with [
Internal Revenue
] Code §414(v) applicable
to 457 plans, in excess of normal deferral amounts. A participant may make
an additional contribution over and above the applicable deferral limit. The
additional contribution is
$4,000
[
$3,000
] for
2005
[
2004
], increasing by $1,000 each year up to $5,000
in 2006. After 2006, the amount of the "Over age 50 and over catch-up" will
be indexed in $500 increments based upon cost-of-living adjustments. A participant
who elects to defer contributions under the normal three-year catch-up provisions
may not also defer under the special Over age 50 catch-up and Code §414(v)
and §457
.
(i)
[
(h)
] Changes before a participant
becomes entitled to a distribution.
(1)
A participant may change the amount of deferral at any
time.
(2)
A participant must execute a change agreement for the prior
457 Plan funds and file the agreement with the participant's agency coordinator
when the participant:
(A)
initiates a transfer;
(B)
changes the participant's primary or secondary beneficiary,
or both; or
(C)
performs a combination of the items specified in subparagraphs
(A) or (B) of this paragraph.
(3)
Upon receipt of a participation agreement or change agreement,
an agency coordinator shall review the agreement to determine whether it complies
with the sections in this chapter.
(A)
With a participant's enrollment, the agency coordinator
shall take the action necessary for payroll initiation.
(B)
If a change agreement complies, the agency coordinator
shall send the agreement to the plan administrator.
(4)
This paragraph applies to changes of beneficiaries, changes
of the prior plan vendor or qualified investment product that receives a participant's
deferrals, and changes to the amount a participant defers per pay period.
An executed change agreement or participation agreement is effective beginning
with the month following the month in which the agency coordinator receives
the agreement from the participant.
(5)
This paragraph applies to transfers. An executed change
agreement is effective on the date that the transfer procedures specified
in §87.15 of this title (relating to Transfers) have been completed.
(j)
[
(i)
] Conflict in beneficiary designations.
The designation of a primary or secondary beneficiary, or both, in a beneficiary
designation form, participation agreement, change agreement, or distribution
agreement prevails over a conflicting designation in any other document.
(k)
[
(j)
] A beneficiary designation that
names a former spouse is invalid unless the designation is completed after
the date of divorce and received by the plan administrator.
(l)
[
(k)
] Paid leave of absence. Deferrals
may continue during a participant's paid leave of absence
, to the extent
that compensation continues
.
(m)
[
(l)
] Unpaid leave of absence. If
a
participant
[
Participant
] separates from service or
takes a leave of absence from the
state
[
State
] because
of service in the military and does not receive a distribution of
his
or her
[
his/her
] account balances, the Plans will allow suspension
of loan repayments until after the conclusion of the period of military service.
Participants on a leave of absence due to qualified military service under
Code §414(u) may elect to make additional annual deferrals upon resumption
of employment with the state equal to the maximum annual deferrals that the
participant could have elected during that period if employment had continued
(at the same level of compensation) without the interruption or leave, reduced
by the annual deferrals, if any. This right applies for five years following
the resumption of employment (or if sooner, for a period equal to three times
the period of the interruption or leave).
(n)
Disability. A disabled participant
may elect to defer compensation during any portion of the period of his or
her disability to the extent that he or she has actual compensation (not imputed
compensation and not disability benefits) from which to make contributions
to the plan and has not had a separation from employment.
(o)
[
(m)
] Termination and resumption
of deferrals.
(1)
An employee may voluntarily terminate additional deferrals
to the prior plan by completing a participation agreement or by contacting
his or her agency coordinator.
(2)
An employee who returns to active service after a separation
from service must enroll in the revised plan before deferrals may resume.
(p)
[
(n)
] Ownership of deferrals and
investment income.
(1)
Until December 31, 1998, a participant's deferrals and
investment income are the property of the State of Texas until the deferrals
and investment income are actually distributed to the employee.
(2)
Effective January 1, 1999, in accordance with Chapter 609,
Texas
Government Code and [
Internal Revenue
] Code §457(g),
all amounts currently and hereafter held under the plan, including deferrals
and investment income, shall be held in trust by the Board of Trustees for
the exclusive benefit of participants and their beneficiaries and may not
be used for or diverted to any other purpose, except to defray the reasonable
expenses of administering the plan. In its sole discretion, the Board of Trustees
may cause plan assets to be held in one or more custodial accounts or annuity
contracts that meet the requirements of [
Internal Revenue
] Code §457(g),
and
§401(f) [
and EGTRRA
]. In addition, effective January
1, 1999, the Board of Trustees does hereby irrevocably renounce, on behalf
of the State of Texas and participating state agencies, any claim or right
which it may have retained to use amounts held under the plan for its own
benefit or for the benefit of its creditors and does hereby irrevocably transfer
and assign all plan assets under its control to the Board of Trustees in its
capacity as the trustee of the trust created hereunder.
It shall be impossible,
prior to the satisfaction of all liabilities with respect to participants
and their beneficiaries, for any part of the assets and income of the trust
fund to be used for, or diverted to, purposes other than for the exclusive
benefit of participants and their beneficiaries.
Adoption of this rule
shall constitute notice to prior plan vendors holding assets under the plan
to change their records effective January 1, 1999, to reflect that assets
are held in trust by the Board of Trustees for the exclusive benefit of the
participants and beneficiaries. Failure of a vendor to change its records
on a timely basis may result in the expulsion of the vendor from the plan.
(q)
[
(o)
] Market risk and related matters.
(1)
The plan administrator, the trustee, an employing state
agency, or an employee of the preceding are not liable to a participant if
all or part of the participant's deferrals and investment income are diminished
in value or lost because of:
(A)
market conditions;
(B)
the failure, insolvency, or bankruptcy of an investment
provider; or
(C)
the plan administrator's initiation of a transfer or investment
of deferrals in accordance with the sections in this chapter.
(2)
A participant is solely responsible for monitoring his
or her own investments and being knowledgeable about:
(A)
the financial status and stability of the investment provider
in which the participant's deferrals and investment income are invested;
(B)
market conditions;
(C)
the resulting cost of making a transfer or distribution
from a qualified investment product;
(D)
the amount of the participant's deferrals and investment
income that are invested in an investment provider's qualified investment
products;
(E)
the riskiness of a qualified investment product; and
(F)
the federal tax advantages and consequences of participating
in the plan and receiving distributions of deferrals and investment income.
(r)
[
(p)
] Alienation of deferrals and
investment income. A participant's deferrals and investment income may not
be:
(1)
assigned or conveyed;
(2)
pledged as collateral or other security for a loan;
(3)
attached, garnished, or subjected to execution; or
(4)
conveyed by operation of law in the event of the participant's
bankruptcy, or insolvency.
§87.9.Investment Products.
(a)
Prohibited activity. A prior plan vendor or prior plan
vendor representative may not solicit investments in an investment product
after August 31, 2000.
(b)
New qualified investment products.
(1)
Notwithstanding anything to the contrary in the sections
in this chapter, other than §87.31 and paragraph (2) of this subsection,
the plan administrator may not:
(A)
approve an investment product as a qualified investment
product; or
(B)
issue a product approval notice.
(2)
Paragraph (1) (A) and (B) of this subsection do not apply
to a qualified investment product that the plan administrator approved for
participation in the plan before May 7, 1990. If the plan administrator has
not executed a product contract with a prior plan vendor that is sponsoring
a qualified investment product, the plan administrator and the prior plan
vendor shall execute a product contract no later than the 90th day after May
7, 1990. If a product contract is not executed, the plan administrator shall
terminate the qualified investment product's participation in the plan.
(c)
Eligibility of investment products. The investment products
that are eligible for approval as qualified investment products are:
(1)
fixed and variable rate annuities;
(2)
life insurance (except that new life policies may not be
offered in the plan by any vendor after December 31, 1992);
(3)
stable value account;
(4)
self-directed brokerage account;
(5)
mutual funds; and
(6)
money market accounts, certificates of deposit, share certificates
or passbook savings accounts offered by a bank, savings and loan association,
or credit union.
(d)
Review of investment products.
(1)
General requirements. The plan administrator may not issue
a product approval notice concerning an investment product unless:
(A)
the prior plan vendor offering the investment product submits
to the plan administrator the documentation and information the plan administrator
requires;
(B)
the prior plan vendor offering the product agrees to accept
both transfers to and the investment of deferrals in its product;
(C)
the plan administrator finds that the advertising material
for the product, if any, complies with the sections in this chapter;
(D)
the plan administrator determines that the disclosure form
for the product complies with the sections in this chapter;
(E)
the plan administrator finds that the investment product
has a guaranteed minimum interest rate if the product has a variable interest
rate;
(F)
the plan administrator determines that the investment product
complies with §87.7(b)(5) of this title (relating to prior plan vendor
participation), if the product is a mutual fund;
(G)
the plan administrator concludes that the inclusion of
the investment product in the plan would be in the best interests of the plan;
and
(H)
the plan administrator ascertains that the vendor has obtained
the necessary approvals from the appropriate regulatory agencies.
(2)
Additional requirements for approving investment products
offered by insurance companies. Before the plan administrator may sign a product
contract, the plan administrator must:
(A)
obtain written confirmation from the Texas Department of
Insurance that the investment product has been approved for sale in Texas;
(B)
determine that the amount of the investment product's premiums,
payments, and benefits are not calculated with regard to the sex of the person
insured or of the recipient of the benefits; and
(C)
determine that the investment product does not insure anyone
other than a participant.
(e)
Product contracts.
(1)
The plan administrator may not sign a product contract
with a prior plan vendor unless the plan administrator has already issued
a product approval notice concerning the investment product that will be covered
by the product contract.
(2)
The plan administrator may not sign a product contract
that does not comply with the sections in this chapter and applicable law.
(3)
The plan administrator may, in its sole discretion, permit
a prior plan vendor to replace, substitute, or merge an existing plan product
with another product, if procedures established by the plan administrator
are met.
(f)
Withdrawal of a qualified investment product from the plan.
(1)
A prior plan vendor may withdraw a qualified investment
product from the plan after notifying, in writing, the plan administrator
and all participants whose deferrals and investment income are invested in
the qualified investment product. The prior plan vendor must ensure that the
plan administrator and the participants receive the written notice no later
than the 60th day before the effective date of the withdrawal.
(2)
A prior plan vendor may establish the effective date of
a withdrawal of the vendor's qualified investment product. The prior plan
vendor must clearly state the effective date in the written notice required
by paragraph (1) of this subsection.
(3)
Notwithstanding paragraph (2) of this subsection, if a
qualified investment product has a specific term, such as a three-year certificate
of deposit or a 30-day passbook account, the effective date of the withdrawal
may not be before the term of the product has expired for every participant
unless approved by the plan administrator, the prior plan vendor must hold
the participants, the plan and plan administrator harmless from any fees or
penalties that may be applicable in connection with such premature termination
or withdrawal. The term of a product will be deemed expired if all participants
have transferred their funds to another qualified investment product.
(4)
After receiving notice of withdrawal, the plan administrator
shall contact each affected participant to submit a prior funds transfer form
for the disposition of
his or her
[
their
] deferrals
and investment income. For each participant from whom the plan administrator
has not received a prior funds transfer form by the effective date of the
withdrawal, the plan administrator shall initiate a transfer of all deferrals
and investment income from the qualified investment product being withdrawn
to the default fund in the revised plan.
(5)
When a prior plan vendor withdraws a qualified investment
product from the plan, the vendor may not charge a fee or permit to be charged
or penalty to participants, the plan or plan administrator for transfers made
after the notice of withdrawal.
(6)
When a prior plan vendor that is an insurance company with
existing life policies in the plan withdraws a life insurance product from
the plan, this paragraph applies in addition to the preceding paragraphs of
this subsection.
(A)
In this paragraph, the term "withdrawn life insurance product"
means a life insurance product that is no longer a qualified investment product
because the life insurance company offering the product has withdrawn the
product from the plan.
(B)
A participant whose deferrals and investment income have
been invested in a withdrawn life insurance product may continue life insurance
coverage with the insurance company offering the product.
(C)
If the insurance company has a life insurance product remaining
in the plan that is comparable to the withdrawn life insurance product, this
paragraph applies. The insurance company shall offer continuing coverage in:
(i)
a qualified investment product that is comparable to the
withdrawn life insurance product; and
(ii)
a life insurance product that is not a qualified investment
product but is comparable to the withdrawn life insurance product.
(D)
If the insurance company does not have a life insurance
product remaining in the plan that is comparable to the withdrawn life insurance
product, this paragraph applies. The company must offer continuing life insurance
coverage to each participant whose deferrals and investment income were invested
in the withdrawn life insurance product. The insurance company shall offer
continuing coverage in a life insurance product that is comparable to the
withdrawn life insurance product.
(E)
If a participant continues life insurance coverage in a
life insurance product that is not a qualified investment product, the participant
must pay the premiums for the coverage directly to the insurance company.
The premiums may not be paid with deferrals or investment income.
(F)
A participant may exercise the participant's right to continue
life insurance coverage only if the participant mails to the insurance company
written notice of intention to continue the coverage. The written notice must
be postmarked no later than the 60th day after the effective date of the withdrawal
of the life insurance product from the plan. However, an insurance company
may increase the 60-day time limit for a participant or for all participants.
(G)
When a participant elects to continue life insurance coverage,
the insurance company with which the coverage is continuing may not:
(i)
refuse to continue the life insurance;
(ii)
require a postponement or an interruption in coverage
for any length of time;
(iii)
require the participant to provide evidence of insurability;
(iv)
require the participant to apply for coverage;
(v)
require the participant to select a different life insurance
product from the withdrawn life insurance product;
(vi)
discriminate in any manner against the participant because
of the company's withdrawal of the product;
(vii)
treat the participant differently than the company would
treat a non-participant with the same life insurance coverage; or
(viii)
increase the premiums charged to the participant solely
because the company withdrew a life insurance product from the plan or because
the participant elected to continue coverage.
(H)
A prior plan vendor must inform the participant in the
written notice required by paragraph (1) of this subsection that the participant
has the rights specified in this paragraph.
(I)
If a prior plan vendor does not comply with subparagraph
(H) of this paragraph, then a participant may exercise the participant's right
to continue insurance up to the 120th day after the prior plan vendor actually
mails written notice to the participant containing a full explanation of the
participant's rights.
§87.15.Transfers.
(a)
Transfers initiated by participants. A participant may
initiate a transfer of all or part of the participant's deferrals and investment
income at any time. The number of transfers that a participant may initiate
per year is unlimited.
(b)
Transfers initiated by the plan administrator.
(1)
Generally.
(A)
The plan administrator may initiate a transfer of all or
part of a participant's deferrals and investment income if the plan administrator
determines that the transfer would be in the best interests of the plan or
the participant.
(B)
Without limiting the plan administrator's authority to
initiate a transfer as specified elsewhere in the sections in this chapter,
the plan administrator may initiate a transfer of all deferrals and investment
income that are invested in:
(i)
the qualified investment products of inactive prior plan
vendors;
(ii)
the qualified investment products of prior plan vendors
whose participation in the plan has terminated; and
(iii)
qualified investment products whose participation in
the plan has terminated.
(2)
Transfers from credit unions.
(A)
The plan administrator shall initiate a transfer of a participant's
deferrals and investment income from a credit union's qualified investment
product in accordance with §87.7(k)(7) of this title (relating to prior
plan vendor participation).
(B)
The authority to initiate a transfer under this paragraph
is in addition to the authority under paragraph (1) of this subsection.
(c)
Value of amounts involved in a transfer initiated by the
plan administrator.
(1)
This subsection applies only when the plan administrator
initiates a transfer from a qualified investment product because the prior
plan vendor sponsoring the product:
(A)
has become an inactive prior plan vendor; or
(B)
has violated a section in this chapter.
(2)
The prior plan vendor who offers the qualified investment
product from which the transfer is being made may not charge or permit to
be charged a fee or penalty to participants, the plan or plan administrator.
(3)
The amount involved in a transfer must be equal to the
total amount of deferrals and investment income that were invested in the
qualified investment product as of the date on which the plan administrator
initiates the transfer.
(4)
Notwithstanding paragraph (3) of this subsection:
(A)
an insurance company may deduct from the amount involved
in a transfer the actual cost of insuring the participant whose deferrals
and investment income are being moved. The period of insurance coverage that
may be considered while calculating the actual cost of insuring the participant:
(i)
starts on the day on which the deferrals and investment
income were invested in the product; and
(ii)
ends on the day on which the plan administrator initiates
the transfer; and
(B)
the amount involved in a transfer from a mutual fund must
be equal to the current market value of the deferrals and investment income
as defined in §87.19(a)(2) of this title (relating to reporting and recordkeeping
by prior plan vendors) without considering the deduction of any fees.
(5)
This subsection prevails over a conflicting provision in
a vendor contract, product contract, disclosure agreement, or any other document.
(d)
Procedures for making a transfer of all deferrals and investment
income from a qualified investment product.
(1)
This subsection applies when the plan administrator initiates
a transfer of all deferrals and investment income of every participant from
a qualified investment product.
(2)
The plan administrator shall send a written notice to the
prior plan vendor who is sponsoring the qualified investment product. The
notice must require the prior plan vendor to:
(A)
immediately issue a check or cause a wire-transfer to be
made in a lump-sum amount equal to the deferrals and investment income being
moved or the plan administrator may choose:
(i)
to not immediately exercise the requirement of paragraph
(2)(A) of this subsection if it is in the best interest of participants; or
(ii)
to request the vendor to issue separate checks or cause
separate wire transfers in behalf of each affected participant; and
(B)
promptly send a list to the plan administrator containing:
(i)
the name of each participant whose deferrals and investment
income were moved;
(ii)
the amount of the deferrals and investment income that
was moved, on a participant-by-participant basis;
(iii)
the social security number of each affected participant;
(iv)
the name of the employing state agency of each affected
participant;
(v)
date of birth;
(vi)
participant's address; and
(vii)
distribution status and frequency.
(3)
If a check is used to make a
plan-to-plan
transfer
in the prior or revised plan
, this paragraph applies.
(A)
The plan administrator, in its discretion, may direct the
prior plan vendor to make the check payable to the payee specified by the
plan administrator, which may be the revised plan or an eligible plan in the
case of a plan-to-plan transfer. An eligible post-severance plan-to-plan transfer
may include a transfer to another eligible governmental plan. If the plan
administrator directs the prior plan vendor to send funds directly to the
revised plan, the plan administrator shall provide instructions concerning
the investment of the amounts transferred.
The plan administrator or
TPA may require such documentation is as satisfactory to the plan administrator
or TPA, as either deems necessary, to effectuate the transfer in accordance
with §457(e)(10) of the Code and §1.457-10(b) of the Income Tax
Regulations. The TPA or plan administrator shall confirm that the other plan
is an eligible governmental defined benefit plan as defined in §1.457-2(f)
of the Income Tax Regulations.
If the specified payee is another prior
plan vendor, the prior plan vendor shall promptly deposit the check into the
applicable account previously agreed upon. The prior plan vendor shall use
its best efforts to ensure that the plan administrator or the specified payee
receives the check no later than the 15th day after the prior plan vendor
receives notification of the transfer.
The amount so transferred shall
be credited to the participant's account balance and shall be held, accounted
for, administered and otherwise treated in the same manner as a deferral by
the participant under the plan, except that the transferred amount shall not
be considered an annual deferral under the plan in determining the maximum
deferral.
(B)
If the check is sent to the plan administrator, the plan
administrator must endorse the check and deposit the check with the TPA selected
by the plan administrator.
(C)
Upon receiving verification of a completed transfer from
the qualified vendor selected by the plan administrator, and receiving a list
of affected participants from the prior plan vendor, the plan administrator
shall notify each affected participant concerning the transfers.
(4)
If a wire-transfer is used to make a transfer, this paragraph
applies.
(A)
The prior plan vendor must ensure that the TPA selected
by the plan administrator to hold these funds receives the wire-transfer within
48 hours.
(B)
The TPA selected by the plan administrator shall promptly
deposit the wire-transfer into the applicable account previously agreed upon,
and notify the plan administrator concerning the deposit.
(C)
The receiving TPA or prior plan vendor shall acknowledge
receipt of the deferrals and investment income in the manner required by the
plan administrator.
(D)
Upon approval of the plan administrator, the prior plan
vendor transferring funds may cause a wire transfer to be made in lieu of
issuing a check:
(i)
if the prior plan vendor sending funds complies with procedures
specified by the plan administrator;
(ii)
the prior plan vendor receiving funds is approved by the
plan administrator to accept a wire transfer of funds; and
(iii)
the prior plan vendor receiving funds complies with procedures
specified by the plan administrator.
(5)
If a participant initiates a transfer, this paragraph applies.
(A)
A participant may initiate a transfer of the participant's
deferrals and investment income through the execution of a prior funds transfer
form in accordance with §87.5(h) of this title (relating to Participation
by Employees).
(B)
After receiving a completed Prior Funds Transfer form,
the plan administrator shall notify the TPA.
(C)
The plan administrator, in its discretion, may direct the
prior plan vendor to make the check payable to the payee specified by the
plan administrator, which may be the TPA or an eligible plan in the case of
a plan-to-plan transfer. An eligible plan-to-plan post-severance transfer
may include a transfer to another eligible governmental plan. If the plan
administrator directs the prior plan vendor to send funds directly to the
TPA, the plan administrator shall provide instructions concerning the investment
of the amounts transferred. If the specified payee is the TPA, they shall
promptly deposit the check into the applicable account previously agreed upon.
The prior plan vendor shall use its best efforts to ensure that the plan administrator
or the specified payee receives the check no later than the 15th day after
the prior plan vendor receives notification of the transfer.
(D)
If the check is sent to the plan administrator, the plan
administrator shall:
(i)
endorse the check in favor of the TPA that will be receiving
the transfer; and
(ii)
mail to the TPA that will be receiving the transfer the
endorsed check and written instructions concerning the investment of the amounts
transferred.
(E)
The TPA must send written confirmation to the plan administrator
concerning the TPA's receipt of the transferred funds and written instructions.
The TPA must ensure that the plan administrator receives the written confirmation
no later than the 15th day after the TPA receives the transferred funds and
instructions.
(F)
Upon approval of the plan administrator, the vendor transferring
funds may cause a wire transfer to be made in lieu of issuing a check:
(i)
if the prior plan vendor sending funds complies with procedures
specified by the plan administrator;
(ii)
the prior plan vendor receiving funds is approved by the
plan administrator to accept a wire transfer of funds; and
(iii)
the prior plan vendor receiving funds complies with procedures
specified by the plan administrator.
(e)
Resolving transfer-related problems. A prior plan vendor
shall use its best efforts, exercise good faith and reasonable diligence in
resolving all transfer-related administrative problems with the plan administrator
or participant within a reasonable length of time, not to exceed 30 days,
after receiving a transfer notification. The plan administrator may not complete
any forms provided by a prior plan vendor in connection with a transfer.
(f)
Transfers into life insurance products.
(1)
The only transfer allowed into a life product is a transfer
from an existing life insurance product to a life insurance product approved
by the plan administrator.
(2)
This paragraph is effective until December 31, 1998. When
a participant chooses to transfer deferrals and investment income to an existing
replacement life insurance product within the same prior plan vendor, the
State of Texas:
(A)
retains all of the incidents of ownership of the life insurance
product;
(B)
is the sole beneficiary of the life insurance product;
(C)
is not required to transfer the life insurance product
to the participant or the participant's beneficiary; and
(D)
is not required to pass through the proceeds of the product
to the participant or the participant's beneficiary.
(3)
This paragraph is effective January 1, 1999, and thereafter.
When a participant chooses to transfer deferrals and investment income to
a life insurance product within the same prior plan vendor, the life insurance
product shall be held in trust for the exclusive benefit of the participant
and beneficiaries.
(g)
Telephone transfers.
(1)
A prior plan vendor may apply for approval to offer to
participants the capability of making transfers of plan deferrals and investment
earnings currently on account with that prior plan vendor from one qualified
investment product or products to another qualified investment product or
products within that prior plan vendor via telephone instructions given by
the participant or plan administrator.
(2)
When a participant is in distribution, the telephone transfer
option may be used; however, it must be used in accordance with §87.17(i)(6)(C)
of this title (relating to Transfers).
(3)
The prior plan vendor and the participant must obtain approval
from the plan administrator and must follow all instructions and procedures
prescribed by the plan administrator.
§87.17.Distributions.
(a)
In general. Upon request, the plan administrator shall
authorize the distribution of a participant's deferrals and investment income
in accordance with the applicable distribution agreement so long as:
(1)
the participant has attained age 70.5;
(2)
the participant has died;
(3)
the participant's employment with the State of Texas has
terminated other than through death; [
or
]
(4)
the participant has complied with subsection (l) of this
section relating to the one-time election of distribution that does not exceed
the dollar limit under [
Internal Revenue
] Code [
of 1986 as
amended,
] §457(e)(9) [
and EGTRRA
]
;
(5)
the participant elects to have
any portion of his or her account balance transferred to a tax-qualified governmental
defined benefit plan (as defined in §414(d) of the Code) in the same
state or another state that provides for the acceptance of plan-to-plan transfers
with respect to the participant; or
(6)
the participant elects a transfer
to be made if the transfer is either for the purchase of permissible service
credit (as defined in §415(n)(3)(A) of the Code) under the receiving
governmental defined benefit plan, or if the transfer is for a repayment to
which §415 of the Code does not apply by reason of §415(k)(3) of
the Code.
(b)
Definitions.
(1)
In subsections (m)-(o) of this section, the term "participant's
deferrals and investment income" means the cash value of the participant's
deferrals and investment income after considering all surrender charges, costs
of insurance, forfeitures, and other similar charges.
(2)
In this section, a beneficiary or secondary beneficiary
"survives" another person only if the beneficiary or secondary beneficiary
is alive on the day after the person's death.
(c)
Content of a distribution agreement.
(1)
A distribution agreement must contain but shall not be
limited to:
(A)
identifying information concerning the participant, including
the date of birth and social security number of the participant;
(B)
the name of the prior plan vendor or revised plan vendor
covered by the agreement;
(C)
the type of qualified investment product from which distributions
will be made, including policy/certificate/or account number;
(D)
the date on which the participant separated from service,
attained age 70.5, or died, whichever is applicable;
(E)
the beginning date of the distributions;
(F)
the
type
[
frequency
] of distribution;
(G)
the amount to be distributed during each time period or
the method for calculating the amount to be distributed during each time period;
and
(H)
beneficiary information, including date of birth(s) and
social security number(s).
(2)
The person filing the distribution agreement must attach
a properly executed Form W-4P to the agreement.
(3)
A distribution agreement must be consistent with the distribution
options available for the qualified investment product covered by the agreement.
The prior plan vendor agent/representative signature on the distribution agreement
signifies that the distribution option is available and can be implemented
as requested.
(d)
Commencement of distributions. Notwithstanding anything
in a distribution agreement:
(1)
the earliest a participant or beneficiary may begin receiving
a distribution is the 51st day after the occurrence that entitles the participant
or beneficiary to the distribution, except this paragraph does not apply to
a lump sum,
an emergency withdrawal or a one-time election distribution;
(2)
if the participant's age is
less than age 70, the distribution period is 27.4 years plus the number of
years that the participant's age is less than age 70, and can be made in monthly,
quarterly or annual installments based on the account balance as of the end
of the year prior to the year for which the distribution is being calculated;
and
[
(2)
the latest a participant may
begin receiving a distribution is April 1st of the calendar year following
the calendar year in which the former employee attains age 70.5.]
(3)
A participant must begin receiving
a distribution by the later of:
(A)
April 1st of the year following the calendar year in which
the participant attains age 70.5; or
(B)
April 1st of the year following the year in which participant
retires or otherwise has a separation from employment.
(e)
Filing of distribution agreements by participants.
(1)
This subsection applies when a participant becomes entitled
to a distribution because:
(A)
the participant has attained age 70.5; or
(B)
the participant's employment with the State of Texas has
terminated other than through death.
(2)
A participant must file a single distribution agreement
for all qualified investment products in which the participant's deferrals
are invested.
(3)
Notwithstanding anything to the contrary in this subsection,
a participant who has not separated from service and who has reached age 70.5
may file a distribution agreement if the participant wants
to begin
distributions
[
to begin
].
If distributions commence in the calendar year
following the later of the calendar year in which the participant attains
age 70.5 or the calendar year in which the separation from employment occurs,
the distribution must be equal to the annual installment payment for the year,
determined under the Uniform Lifetime Table of the Income Tax Regulations
for the participant's age regarding types of distributions. This must also
be paid before the end of the calendar year of commencement of distributions.
(4)
Notwithstanding any other plan provision, amounts deferred
by a former participant of the plan not yet payable or made available to such
participant may be transferred to another eligible plan of which the former
participant has become a participant, if:
(A)
the plan receiving such amounts provides for
its
[
their
] acceptance;
and
(B)
a participant separates from service with the participant's
agency and accepts employment with another entity maintaining an eligible
deferred compensation plan [
; and
]
[
(C)
a participant has not yet
begun receiving plan distributions.]
(5)
A participant or a beneficiary of a participant who previously
filed an irrevocable distribution election under the prior plan or under the
revised plan may change that distribution election or cancel that distribution
election by notifying the plan administrator. Such notification must be in
writing
on a distribution agreement form
and received by the plan
administrator at least 30 days prior to the scheduled distribution date.
(6)
A participant may request a trustee-to-trustee transfer
of assets from the prior plan or the revised plan to a governmental defined
benefit plan in the same state or another state for the purchase of permissible
service credit (as defined in
the
[
Internal Revenue
]
Code
§414(d) and (p)
[
§414(p)
] and [
Internal Revenue
] Code §415(n)(3)(A)) under such plan or a repayment
to which [
Internal Revenue
] Code §415 does not apply by reason
of subsection (k)(3) thereof.
The participant may elect to have any portion
of the account balance transferred to a governmental defined benefit plan.
(7)
Upon receipt of a certified copy of a qualified domestic
relations order,
a certified copy of a judgment, decree or order (including
approval of a property settlement agreement) that relates to the provision
of child support, alimony payments, or the marital property rights of a spouse
or former spouse, child, or other dependent of a participant, and same is
made pursuant to the domestic relations law of any state, then the amount
of the participant's account balance shall be paid in the manner and to the
person or persons so directed in the domestic relations order. Such payment
shall be made without regard to whether the participant is eligible for a
distribution of benefits under the plan. The plan administrator or TPA shall
establish reasonable procedures for determining the status of any such decree
or order and for effectuating distribution pursuant to the domestic relations
order
[
the plan administrator may distribute to an alternate payee
in a lump sum immediate distribution, the proceeds as directed by the order.
]
(§414(p) of the Code and §1.457-10(c) of the Income
Tax Regulations)
(8)
At a participant's
or surviving spouse's
request,
the plan administrator may process a trustee-to-trustee transfer of an eligible
rollover distribution upon receipt of appropriate instructions from the receiving
plan.
(f)
Minimum distributions during the life of a participant.
(1)
This subsection applies to distributions to a participant
during the life of the participant, notwithstanding anything to the contrary
in the participant's distribution agreement.
(2)
The amount distributed to the participant must be calculated
so that the distributions:
(A)
will be distributed over a period not exceeding the life
expectancy of the participant
as set forth in the Uniform Lifetime Table
of the Income Tax Regulations for the participant's age on the participant's
birthday for that year
or the life expectancy of the participant and
the participant's named beneficiary; [
and
]
(B)
will satisfy the minimum distribution requirements of the
[
Internal Revenue
] Code [
of 1986 as amended,
] §457(d)(2), §401(a)(9),
[
EGTRRA
] and associated statutes and regulations
; and
[
.
]
(C)
For the purpose of paragraph
(2) of this subsection, life expectancies may not be recalculated annually.
For any year, the participant can elect distribution of a greater amount not
to exceed the amount of the remaining account balance in lieu of the amount
calculated using this formula.
(3)
The plan administrator shall reject a proposed distribution
agreement that does not comply with paragraph (2) of this subsection. The
plan administrator shall require the amendment of an existing distribution
agreement that does not comply with paragraph (2) of this subsection.
[
(4)
For the purpose of paragraph
(2) of this subsection, life expectancies may not be recalculated annually.]
(g)
Review of distribution agreements by the plan administrator.
The plan administrator shall review each distribution agreement received to
ensure that:
(1)
a distribution would be in compliance with the sections
in this chapter; and
(2)
the minimum distribution requirements of this section have
been satisfied.
(h)
Amendments of distribution agreements.
(1)
Beginning date for a distribution. The beginning date for
a distribution may be deferred or cancelled, and the amended distribution
agreement must be received by the plan administrator no later than the 30th
day before the original distribution begin date.
(2)
Frequency of distribution. The frequency of
a
distribution
may be amended if the plan administrator receives an amended distribution
agreement no later than the 30th day before the
next scheduled
[
beginning date of the first
] distribution.
(3)
Amount of distribution. The amount to be distributed during
each time period may be amended only if the plan administrator receives an
amended distribution agreement no later than the 30th day before the
next scheduled
[
beginning date of the first
] distribution.
(4)
Beneficiaries.
(A)
The primary and secondary beneficiaries named in a distribution
agreement may be changed at anytime by filing a change agreement with the
agency coordinator of the state agency at which the participant was employed
or by submitting a beneficiary designation form directly with the TPA, for
the revised plan.
(B)
Upon receipt of the change agreement, the agency coordinator
shall send
a copy of
the agreement to the plan administrator.
(C)
The change agreement is effective upon receipt by the plan
administrator.
(D)
A beneficiary designation that names a former spouse is
invalid unless the designation was signed after the date of divorce and received
by the plan administrator.
(5)
Unforeseeable emergency distribution
[
Emergency withdrawals
]. Notwithstanding anything to the contrary in
this subsection, a distribution agreement may be amended to relieve a severe
financial hardship caused by an unforeseeable emergency.
(6)
Procedures for amending a distribution agreement.
(A)
A participant or beneficiary who wants to amend the participant's
distribution agreement must file an amended distribution agreement with the
plan administrator. The amended distribution agreement must contain the word
"Amended" at the top of the agreement.
(B)
Upon receipt of the amended distribution agreement, the
plan administrator; shall promptly review the agreement for compliance with
the sections in this chapter.
(C)
If the amended distribution agreement does not comply with
the sections in this chapter, the agreement will be returned to the participant
or beneficiary for corrections.
(D)
After the plan administrator receives a signed distribution
agreement, the plan administrator and the prior plan vendor or TPA covered
by the agreement shall take the steps specified in subsections (h) and (j)
of this section.
(7)
Effective date of amended distribution agreements is
no later than
30 days after the plan administrator receives the form.
An amended distribution agreement is effective with the
next
[
first
] distribution.
(i)
Procedure for making distributions.
(1)
Upon receiving a letter of authorization, the prior plan
vendor or TPA shall issue checks payable to the participant or beneficiary
and mail the checks as instructed in the letter of authorization.
(2)
The plan administrator may not complete any forms provided
by a prior plan vendor in connection with a distribution. A prior plan vendor
may not require the plan administrator to submit periodic letters of authorization
beyond the initial letter of authorization unless the plan administrator has
agreed in writing. A prior plan vendor may not impose any requirements as
a prerequisite to a distribution that are not specifically mentioned in the
sections in this chapter.
(3)
The plan administrator shall provide each prior plan vendor
with the names and signatures of the individuals who are authorized to sign
letters of authorization.
(4)
A prior plan vendor shall confirm each letter of authorization
as instructed in the letter.
(j)
Unforeseeable emergency distribution
[
Emergency withdrawals
].
[
(1)
A participant may request
an emergency withdrawal regardless of whether a distribution to the participant
has already started.]
(1)
[
(2)
] The participant must request
the
unforeseeable
emergency withdrawal by filing a completed emergency
hardship
withdrawal application with the plan administrator. An emergency
hardship
withdrawal application [
:
]
must show that the
prerequisites for making an unforeseeable emergency withdrawal have been fulfilled.
[
(A)
must show that the prerequisites
for making an emergency withdrawal have been fulfilled; and ]
[
(B)
must be accompanied by two
copies of a Form W-4P specifically tailored to the withdrawal.]
(2)
[
(3)
] The plan administrator shall
approve the
unforeseeable
emergency withdrawal if the plan administrator
determines that:
(A)
an unforeseeable emergency has occurred;
(B)
the severe financial hardship cannot be relieved:
(i)
through reimbursement or compensation by insurance or otherwise;
(ii)
by liquidating the assets of the participant to the extent
the liquidation of the assets would not itself cause severe financial hardship;
(iii)
by cessation of deferrals under the plan;
(iv)
by other distributions or nontaxable loans from the Plan
or any other qualified retirement plan, or by borrowing from commercial sources
on reasonable commercial terms; or
(v)
through a combination of the actions specified in clauses
(i) - (iii) of this subparagraph; and
(C)
the
unforeseeable
emergency withdrawal would
satisfy the federal regulations for
unforeseeable
emergency withdrawals
under the [
Internal Revenue
] Code [
of 1986,
] §457[
, as amended and, EGTRRA
].
(3)
[
(4)
] If the plan administrator approves
an
unforeseeable
emergency withdrawal, the plan administrator shall
determine the amount of the withdrawal. The amount may not exceed the amount
reasonably needed to overcome the severe financial hardship, after considering
the federal income tax liability resulting from the withdrawal.
(4)
[
(5)
] The term "unforeseeable emergency"
means a severe financial hardship to a participant caused by:
(A)
a sudden and unexpected illness or accident of a participant
or of a participant's dependent (as defined in the [
Internal Revenue
] Code
§457,
[
of 1986 as amended
], §152(a)
, and the Working Families Tax Relief Act of 2004
[
and EGTRRA
];
(B)
the loss of the property of a participant because of a
casualty (including the need to rebuild a home following damage to a home
not otherwise covered by homeowner's insurance, as a result of a natural disaster);
or
(C)
a similar extraordinary and unforeseeable circumstance
arising from events beyond the control of a participant, which includes the
prevention of
imminent
foreclosure or eviction from a
participant's
[
participant
] or beneficiary's primary residence, funeral
expenses
of participant's dependents (as defined in §152(a) of the
Code and the Working Families Tax Relief Act of 2004)
, and payment of
non-reimbursed medically necessary expenses, which includes non-refundable
deductibles, as well as the cost of prescription drug medications.
(5)
[
(6)
] The term "unforeseeable emergency"
excludes:
(A)
the necessity to send a child to college;
(B)
the purchase of a home; [
and
]
(C)
such emergency that is or may
be relieved through:
(i)
reimbursement or compensation from insurance
or otherwise;
(ii)
liquidation of the participant's assets, to
the extent the liquidation would not itself cause severe financial hardship;
or
(iii)
by cessation of deferrals under the plan.
This includes other distributions or nontaxable loans from the Plan or any
other qualified retirement plan, or by borrowing from commercial sources on
reasonable commercial terms; and
(D)
[
(C)
] other similar circumstances.
(6)
[
(7)
] The plan administrator may
rely on the information provided by a participant in connection with the participant's
request for an emergency withdrawal. The participant is solely responsible
for the sufficiency, accuracy, and veracity of the information.
(7)
[
(8)
] If the plan administrator denies
a participant's request for an emergency withdrawal or if the participant
disagrees with the amount of the approved emergency withdrawal, the participant
may appeal to the Employees Retirement System of Texas in accordance with §87.23
of this title (relating to the Grievance Procedure).
(8)
[
(9)
] If the plan administrator approves
a participant's request for an emergency withdrawal, the participant must
agree to cease all deferrals, except deferrals to life insurance products,
to both this plan and the Texa$aver 401(k) plan for a six month period following
the approval.
(9)
[
(10)
] The plan administrator may
not approve an emergency withdrawal request from a primary or secondary beneficiary.
(10)
The plan administrator may
not exceed the amount reasonably necessary to satisfy the emergency need (which
may include any amounts necessary to pay any federal, state or local income
taxes or penalties reasonably anticipated to result from the distribution).
(k)
[
One-time election of distribution that does not exceed
the dollar limit under Internal Revenue Code §457 of 1986 as amended, §457(e)(9)
and EGTRRA.
] A participant may elect to receive a
one-time
distribution
of the total account balance if:
(1)
such amount does not exceed the
$5000
dollar
limit under [
Internal Revenue
] Code
§457
[
of 1986, as amended
], §457(e)(9)
,
[
and EGTRRA
]
or the dollar limit under Code §411(a)(11) if greater as of the date
that payments commence or on the date of the participant's death. In such
event, payment shall be made to the participant (or to the beneficiary if
the participant is deceased) in a lump sum equal to the participant's account
balance
[
as of the date of the election
];
(2)
no amount has been deferred under the plan with respect
to such participant during the two-year period ending on the date of the distribution;
(3)
there has been no prior distribution under the plan to
such participant to which this subsection applied; and
(4)
a one-time election form is completed and submitted to
the plan administrator through the participant's state agency coordinator.
(l)
Naming of beneficiaries. When a participant or beneficiary
files a distribution agreement, the participant or beneficiary may name one
or more primary and secondary beneficiaries. The naming of beneficiaries in
a distribution agreement supersedes any previous naming of beneficiaries in
a participation agreement or change agreement.
(m)
Death of a participant when the participant has named a
beneficiary.
(1)
This subsection applies only if a participant has named
a beneficiary in a participation agreement, change agreement, beneficiary
designation form or distribution agreement.
[
(2)
When this subsection requires
the plan administrator to order a distribution, the plan administrator shall
order the distribution on the 90th day after a participant's death:]
(2)
[
(3)
] The plan administrator shall
order a distribution to a primary beneficiary if the beneficiary:
(A)
survives the participant; and
(B)
is alive on the date of the order.
(3)
[
(4)
] The plan administrator shall
order a distribution to a secondary beneficiary if:
(A)
the secondary beneficiary survives the participant;
(B)
the secondary beneficiary is alive on the date of the order;
and
(C)
no primary beneficiaries survive the participant.
(4)
[
(5)
] The plan administrator shall
order a distribution in accordance with subsection (p) of this section if
a primary or secondary beneficiary survives the participant but is not alive
on the date of the order.
(5)
[
(6)
] This paragraph applies if a
participant designates more than one primary beneficiary and more than one
primary beneficiary survives the participant. The plan administrator shall
order the distribution of the participant's deferrals and investment income
to the surviving primary beneficiaries in equal shares unless the distribution
agreement provides otherwise. The estates and heirs of the primary beneficiaries
who did not survive the participant and the surviving secondary beneficiaries,
if any, may not receive any benefits.
(6)
[
(7)
] This paragraph applies if a
participant designates more than one secondary beneficiary, more than one
secondary beneficiary survives the participant, and no primary beneficiary
survives the participant. The plan administrator shall order the distribution
of the participant's deferrals and investment income to the surviving secondary
beneficiaries in equal shares unless the distribution agreement provides otherwise.
The estates and heirs of the primary and secondary beneficiaries who did not
survive the participant may not receive any benefits.
(7)
[
(8)
] The plan administrator shall
order the lump-sum payment to the participant's estate of the balance of the
participant's deferrals and investment income if:
(A)
the participant named a primary and a secondary beneficiary
but neither survived the participant; or
(B)
the participant named a primary beneficiary but did not
name a secondary beneficiary and the primary beneficiary did not survive the
participant.
(8)
[
(9)
] The plan administrator shall
order the lump-sum distribution of a participant's deferrals and investment
income to the person entitled to receive the distribution if the person is
alive on the date of the order and the person files a distribution agreement
requesting a lump-sum distribution.
(9)
[
(10)
] When the plan administrator
orders a distribution to a primary or secondary beneficiary, the plan administrator's
order must be in accordance with the beneficiary's distribution agreement
so long as the agreement complies with the sections in this chapter.
(10)
[
(11)
] This paragraph applies when
the plan administrator orders other than a lump-sum distribution to a primary
or secondary beneficiary and distributions to the participant did not begin
before the participant's death.
For distributions to a surviving spouse,
any distribution made before the calendar year in which the participant would
have attained age 70.5 is not a required minimum distribution. For the calendar
year in which the participant would have attained age 70.5 or any later year,
the amount of the minimum annual distribution payment may be treated as the
amount of the required minimum distribution.
Notwithstanding a primary
or secondary beneficiary's distribution agreement, the amount distributed
must be calculated so that the distributions:
(A)
will begin no later than December 31 in the year that the
participant would have attained age 70.5 or December 31 of the year following
the participant's death, whichever is later for a spousal beneficiary; or
(B)
December 31 of the year following the participant's death
and entire amount must be distributed by the end of the fifth year following
the year of participant's death for non-spousal beneficiary.
(C)
will be made over the life of the person receiving the
distributions or over a period not extending beyond the life expectancy of
the person
(using the single life table from the Income Tax Regulations)
;
(D)
will be made in substantially non-increasing amounts;
(E)
will be made annually or more frequently than annually
after the first distribution; and
(F)
will satisfy the minimum distribution requirements of the
[
Internal Revenue
] Code [
of 1986 as amended,
] §457(d)(2), §401(a)(9),
[
and EGTRRA
] and associated statutes and regulations.
(11)
[
(12)
] This paragraph applies when
the plan administrator orders other than a lump-sum distribution to a primary
or secondary beneficiary and distributions to the participant began before
the participant's death. Notwithstanding a primary or secondary beneficiary's
distribution agreement, the amount distributed to the primary or secondary
beneficiary must be calculated so that the distributions:
(A)
will be made at least as rapidly as under the method of
distribution selected by the participant; and
(B)
will satisfy the minimum distribution requirements of the
[
Internal Revenue
] Code [
of 1986 as amended,
] §457(d)(2),
and
§401(a)(9) [
and EGTRRA
].
(12)
[
(13)
] If a participant dies before
distributions to him began and the beneficiary or secondary beneficiary entitled
to receive the participant's deferrals and investment income is the participant's
surviving spouse, this paragraph applies.
(A)
Paragraph
(10)
[
(11)
] of this subsection
applies to the distributions to the surviving spouse except as specified in
this paragraph.
(B)
Notwithstanding paragraph
(10)
[
(11)
]
of this subsection, the surviving spouse may delay the start of the receipt
of the deferrals and investment income until a date not later than the date
when the participant would have attained age 70.5.
(C)
Notwithstanding paragraph
(10)
[
(11)
]
of this subsection, after a distribution to the surviving spouse begins, the
entire amount must be paid over a period not exceeding the spouse's life expectancy
using the single life table from the Income Tax Regulations for the beneficiary's
age on the beneficiary's birthday for the year that the distribution begins,
reduced by one for each year that has elapsed after that year
.
(D)
If the surviving spouse dies before distributions to the
spouse begin, then the surviving spouse is a participant for the purpose of
paragraph
(10)
[
(11)
] of this subsection.
[
(14)
The plan administrator shall
reject a proposed distribution agreement that does not comply with paragraphs
(11)-(13) of this subsection. The plan administrator shall require the amendment
of an existing distribution agreement that does not comply with paragraphs
(11)-(13).]
(14)
[
(15)
] For the purpose of paragraphs
(10) - (12)
[
(11) -(13)
] of this subsection, life expectancies
may not be recalculated annually.
(n)
Death of a participant when the participant has not named
a beneficiary.
(1)
This subsection applies only when a participant has not
named a beneficiary in a participation agreement, change agreement, beneficiary
designation form, or distribution agreement.
(2)
The plan administrator shall order the distribution to
the participant's estate of the balance of the participant's deferrals and
investment income.
(o)
Death of a beneficiary.
(1)
This subsection applies if:
(A)
a participant named a beneficiary in a participation agreement,
change agreement, or distribution agreement or a beneficiary designation form;
(B)
the participant died;
(C)
the beneficiary survived the participant but has since
died;
(D)
the plan administrator has ordered, in accordance with
subsection (m) of this section, a distribution to the beneficiary or would
have ordered a distribution to the beneficiary if the beneficiary had not
died; and
(E)
the beneficiary did not receive all the participant's deferrals
and investment income before the beneficiary's death.
(2)
If the deceased beneficiary filed a distribution agreement
and the agreement names a primary beneficiary, the plan administrator shall:
(A)
allow the primary beneficiary to have a distribution which
will be made at least as rapidly as under the method of distribution selected
by the participant, and which will also satisfy the minimum distribution requirements
of the [
Internal Revenue
] Code [
of 1986 as amended,
] §457(d)(2),
and
§401(a)(9) [
and EGTRRA
]; or
(B)
order a lump sum payment to the primary beneficiary's estate
if the primary beneficiary survived the beneficiary who filed the distribution
agreement but is not alive on the date of the order.
(3)
If the deceased beneficiary filed a distribution agreement
and the agreement names a secondary beneficiary, the plan administrator shall
order a lump-sum payment to:
(A)
the secondary beneficiary if:
(i)
the secondary beneficiary is alive on the date of the order;
and
(ii)
no primary beneficiary survived the deceased beneficiary;
(B)
the secondary beneficiary's estate if:
(i)
the secondary beneficiary survived the deceased beneficiary;
(ii)
the secondary beneficiary is not alive on the date of
the plan administrator's order; and
(iii)
no primary beneficiary survived the deceased beneficiary.
(4)
The lump-sum payment must be made to the estate of the
deceased beneficiary if:
(A)
the deceased beneficiary's distribution agreement does
not name a beneficiary;
(B)
the deceased beneficiary did not file a distribution agreement;
or
(C)
no beneficiary named in the deceased beneficiary's distribution
agreement survived the deceased beneficiary.
(5)
When more than one primary or secondary beneficiary of
a deceased beneficiary is entitled to a lump-sum distribution, the distributions
must be made in equal shares unless the deceased beneficiary's distribution
agreement provides otherwise.
(p)
Distributions to minors and incompetents.
(1)
The plan administrator may authorize the payment of a distribution
to a person or entity other than the participant or beneficiary otherwise
entitled to receive the distribution if satisfactory evidence is presented
to the plan administrator that the participant or beneficiary is:
(A)
a minor; or
(B)
has been adjudicated by a court of law as mentally incompetent
and unable to provide a valid release
, receipt and discharge
for
the payment
or is deemed so by the plan administrator
.
(2)
If the conditions of the preceding paragraph are satisfied,
the plan administrator shall make the distribution payable to the guardian
of the participant or beneficiary.
Such payments shall be considered
a payment to such participant or beneficiary, and shall, to the extent made,
be deemed a complete discharge of any liability of the Plan, State of Texas,
plan administrator and TPA for all payments required under the plan.
(3)
If no guardian has been appointed and after having obtained
a proper release, the plan administrator shall make the distribution payable
to:
(A)
the person or entity maintaining custody of the participant
or beneficiary;
(B)
the custodian of the participant or beneficiary under the
Texas Uniform Gifts to Minors Act (Texas Property Code, §141.002 et seq.)
if the participant or beneficiary resides in the State of Texas;
(C)
the custodian of the participant or beneficiary under a
law similar to the Texas Uniform Gifts to Minors Act if the participant or
beneficiary resides outside the State of Texas; or
(D)
the court of law with jurisdiction over the participant
or beneficiary.
(q)
Distributions to missing persons.
(1)
This subsection applies when the plan administrator is
unable to determine the location of a participant or beneficiary who is entitled
to a distribution.
(2)
When the plan administrator does not know the location
of a participant or beneficiary, the agency coordinator for the participant
or beneficiary must send a certified letter to the last known address of the
participant or beneficiary.
(3)
If the certified letter does not result in the discovery
of the location of the participant or beneficiary, the agency coordinator
shall inform the plan administrator and provide proof to the plan administrator
that the certified letter was sent.
(4)
When the plan administrator does not know the location
of a participant or beneficiary, the agency coordinator, TPA or plan administrator
shall make a reasonable attempt to locate the participant or beneficiary through
certified mail at the last known address, through notification to the Social
Security Administration, the Pension Benefit Guaranty Corporation, or other
appropriate source. If the participant has not responded within six (6) months,
upon
[
Upon
] receiving the notification and proof
of
mailing
[
from an agency coordinator
], the plan administrator
may direct that all benefits due the participant or beneficiary be deposited
in a qualified investment product
or trust fund
that the plan administrator
has specifically designated for this purpose
and shall continue to hold
the benefits due such person
.
(r)
Processing of distributions and emergency withdrawals.
A prior plan vendor or TPA shall process distributions and emergency withdrawals
and resolve administrative problems with the plan administrator within a reasonable
length of time, not to exceed the 30th day after receiving a letter of authorization
for distributions and not to exceed the 15th day after receiving a letter
of authorization for emergency withdrawals.
(s)
Loans to participants. The plan administrator is authorized
to implement procedures to establish a loan program for the revised plan in
compliance with Code §72(p)(2). Plan loans shall be permitted only from
assets deposited in the revised plan. Participants with account balances in
the prior plan must transfer those balances to the revised plan in order to
qualify for a plan loan.
The security of the loan is a pledge or application
fee of $50 per loan. General loans are processed without any pre-loan paperwork.
A participant's execution on the loan check authorizes the plan administrator
to make payroll deductions from the participant's compensation. The loan balance
may be prepaid at any time without penalty. The maximum number of active loans
available to any participant at any given time is two (2) per plan.
(1)
Loans made pursuant to this
section (when added to the outstanding balance of all other loans made by
the plan to the participant) shall be limited to the lesser of:
(A)
$50,000 reduced by the excess (if any) of the
highest outstanding balance of loans from all plans to the participant during
the one year period ending on the day before the date on which such loan is
made, over the outstanding balance of loans from all plans to the participant
on the date on which such loan was made; or
(B)
the greater of one half (1/2) of the present
value of the non-forfeitable accrued benefit of the participant under the
plan; or $10,000.
(2)
Any loan may not be for an
amount less than $1,000.
(3)
The terms of the loan shall:
(A)
require level amortization with payments not
less frequently than quarterly throughout the repayment period, except that
alternative arrangements for repayment may apply in the event that the participant
is on a bona fide unpaid leave of absence for military leave within the meaning
of §414(u) of the Code or for the duration of a leave which is due to
qualified military service;
(B)
require that the loan be repaid within five
years unless the participant certifies in writing to the plan administrator
that the loan is to be used to acquire a principal residence; and
(C)
provide for either a general purpose loan or
a principal residence loan with rates and terms fixed for the life of the
loan. Subject to change from time to time, the interest rate for repayment
is one percent (1%) over the prime rate published in the Wall Street Journal
on the last business day of the prior month.
(4)
Any loan to a participant under
the plan shall be secured by the pledge of the portion of the participant's
interest in the plan invested in such loan.
(5)
[
(1)
] In accordance with the federal
Soldiers' & Sailors' Civil Relief Act of 1940, interest will accrue during
the period of suspended payments at the original loan rate or at the rate
of six percent (6%), whichever is less. In no event will interest
on
any loan
exceed the maximum rate permitted by applicable law.
(6)
In the event that a participant
fails to make any loan payment within 90 days after the date such payment
is due, a default on the loan shall occur. In the event of such default, all
remaining payments on the loan shall be immediately due and payable, effective
as of the first day of the calendar month following the month in which a default
occurs. In the case of any loan default, the plan administrator shall apply
the portion of the participant's interest in the plan held as security for
the loan in satisfaction of the loan on the date of severance from employment.
In addition, the plan administrator shall take any legal action it shall consider
necessary or appropriate to enforce collection of the unpaid loan, and the
costs of any legal proceeding or collection including but not limited to the
plan administrator's and TPA's reasonable attorneys fees, costs and prejudgment
and postjudgment interest shall be charged to the account balance of the participant.
Any defaulted loans incurred will continue to accrue interest and will reduce
the number of available loans. Amounts borrowed through the loan program are
not taxable distributions and are not subject to federal income taxes, unless
the participant defaults on the loan. Loans are considered in default if no
payments have been made for 90 days, or general loans are not paid off within
five (5) years. If a participant retires or separates from employment, payroll
deductions will stop and the loan is immediately due and payable in full.
If the loan is not paid within the 90 day period, the outstanding balance,
pursuant to IRS regulations, will be considered a distribution, and the plan
administrator shall report the loan to the IRS as a taxable distribution in
the year that the loan defaults. In the event a loan is outstanding or in
default or both hereunder on the date of a participant's death, the participant's
estate shall be the beneficiary as to the portion of participant's interest
in the plan invested in such loan.
(7)
[
(2)
] In accordance with [
Internal
Revenue
] Code §72 (p) and associated Treasury Regulations at §1.72(p)-1,
the Plans will suspend payments for up to twelve (12) months for non-military
leaves of absence if the
participant
[
Participant
] is
on a bona fide leave of absence and the leave is either without pay
,
or the
participant's
[
Participant's
] after-tax
pay is less than the installment payment amount under the terms of the loan.
When payments resume, installment payments may not be less than the amount
required under the terms of the original loan. In no event may the term of
the loan be extended beyond its original due date; accept upon express approval
of the hardship committee. Therefore, the participant must seek a revised
amortization schedule and pay higher monthly payments or continue the original
payment schedule and make one or more additional payments before the end of
the loan term in sufficient amounts to pay the loan in full when due.
(8)
As a condition of the loan,
a participant shall be required to enter into an irrevocable agreement authorizing
the employer to make payroll deductions from his or her compensation as long
as the participant is an employee and to transfer such payroll deduction to
the Trustee or TPA in payment of such loan plus interest. Repayments of a
loan shall be made by payroll deduction of equal amounts (comprised of both
principal and interest) from each paycheck, with the first such deduction
to be made as soon as practicable after the loan funds are disbursed; provided,
however:
(A)
that a participant may prepay the entire outstanding
balance of his or her loan at any time without penalty (but may not make a
partial prepayment); and
(B)
that if any payroll deductions cannot be made
in full because a participant is on an unpaid leave of absence or is no longer
employed by a participating employer (that has consented to make payroll deductions
for this purpose) or the participant's paycheck is insufficient for any other
reason, the participant shall pay directly to the plan the full amount that
would have been deducted from the participant's paycheck, with such payment
to be made by the last business day of the calendar month in which the amount
would have been deducted. Such participants will repay themselves with interest
through payroll deductions in equal installments over the duration of the
loan. Loan repayments are deducted each pay period and posted along with contributions.
Loan refinancing is not available.
(t)
Federal withholding and reporting requirements.
(1)
A prior plan vendor or TPA shall file all reports required
by the Internal Revenue Service (IRS) when any deferrals and investment income
are distributed or otherwise made available to a participant or beneficiary.
Payments made to a participant during the participant's life must be reported
as taxable wages on a Form 1099-R or another appropriate form which may be
hereafter promulgated by the IRS. Pursuant to the provisions of Internal Revenue
Service Revenue Ruling 86-109 (1986-2 CB 196), payments to the beneficiary
of a deceased participant must be reported on IRS Form 1099-R (or another
appropriate form which may be hereafter promulgated by the IRS) as taxable
income of the beneficiary.
(2)
A prior plan vendor or TPA shall file an application for
authorization to act as agent of the State of Texas, or effective January
1, 1999, the plan, with the District Director of the Internal Revenue Service
Center where the prior plan vendor or TPA files its returns. The application
shall include Form 2678 - Employer Appointment of Agent under
§3504
[
Section 3504
] of the [
Internal Revenue
] Code,
which shall be supplied by the plan administrator, and shall be completed
and filed in accordance with the instructions set forth in Internal Revenue
Service Publication 1271. The prior plan vendor shall promptly furnish to
the plan administrator a copy of such vendor's letter of authorization from
the Internal Revenue Service approving the appointment of the prior plan vendor
as agent.
(3)
When reporting to the Internal Revenue Service, the prior
plan vendor and TPA shall use the vendor's Federal Employer Identification
Number and shall comply with all requirements of Revenue Procedure 70-6 as
set out in Internal Revenue Service Publication 1271 and as subsequently amplified
or superseded by subsequent Revenue Procedures. A prior plan vendor may not
use the federal employer identification number of the plan, plan administrator,
TPA, or the State of Texas. Regardless of how many qualified investment products
a prior plan vendor sponsors, the vendor must use the same federal employer
identification number for all reports to the Internal Revenue Service.
(4)
Federal tax withholding is mandatory for distributions
to participants. A prior plan vendor or TPA shall accurately determine any
amounts to be withheld for federal taxes based on a Form W-4P submitted by
the participant at the time of a distribution. [
If no Form W-4P is provided,
the participant must be considered single with no dependents.
]
Distributions with a periodic payout of less than 10 years or a lump sum distribution
are subject to a mandatory 20% federal income tax withholding. If no Form
W-4P is provided, the participant shall be taxed as "single with no dependents."
Vendors who maintain participant account balances in the prior plan
shall provide the required IRC
§402(f)
[
402(f)
]
safe harbor notice to all 457 plan participants
or their beneficiaries
prior to the payment of an eligible rollover distribution. The Tax
Equity and Fiscal Responsibility Act does not apply to a deferred compensation
plan governed by the [
Internal Revenue
] Code [
of 1986 as amended,
] §457 [
and EGTRRA
].
(5)
Total death benefits, including life insurance proceeds,
are taxable as ordinary income to the beneficiary and must be reported on
a Form 1099-R in accordance with paragraph (m) of this subsection.
(6)
A prior plan vendor or TPA shall mail a copy of all reports
filed with the Internal Revenue Service about a participant or beneficiary
to the participant's or beneficiary's home address.
(u)
Notwithstanding any provisions to the contrary, the option
to receive periodic distributions from a product in the "prior plan" by a
terminated participant or beneficiary whose original distribution begins on
or after October 1, 2004 is removed. Effective October 1, 2004, terminating
participants and beneficiaries must transfer all funds to the revised plan,
receive a lump sum distribution of their entire plan balance, or roll their
entire account balance into an account outside of the prior plan.
§87.19.Reporting and Recordkeeping by Prior Plan Vendors.
(a)
Definition of current market value. In this section, the
term "current market value" has the following meanings.
(1)
For an investment in a qualified investment product offered
by a bank, credit union, or savings and loan association, current market value
means the amount of deferrals plus investment income minus withdrawals minus
applicable fees.
(2)
For an investment in a mutual fund, current market value
means the price of each share at the end of the calendar quarter multiplied
by the number of shares purchased with deferrals and investment income minus
applicable fees.
(3)
For an investment in a term life insurance product, the
current market value is usually zero.
(4)
For an investment in a life insurance product, current
market value means the cash value of the product minus applicable fees.
(5)
For an investment in a annuity, current market value equals
the amount of deferrals plus investment income minus payouts minus applicable
fees. For annuitized accounts, current market value means the present value
of all remaining payments, taking into consideration the prevailing statutory
interest rates pursuant to the Texas Insurance Code, Article 3.28.
(b)
Reports to participants or beneficiaries.
(1)
Generally.
(A)
A prior plan vendor shall issue a report after the end
of each calendar quarter to each participant or beneficiary whose deferrals
and investment income are invested in a qualified investment product offered
by the prior plan vendor, except if the investment is in a product that is
annuitized.
(B)
The report shall cover all transactions during a calendar
quarter.
(C)
A prior plan vendor shall ensure that the participant or
beneficiary receives the report no later than the 45th day after the end of
each calendar quarter.
(D)
The report must show for each qualified investment product:
(i)
the amount of the participant's or beneficiary's deferrals
and investment income in the product, including transfers;
(ii)
the amount of applied product costs or surrender charges;
(iii)
the date and amount of withdrawals during the reporting
period; and
(iv)
the current market value of the participant's or beneficiary's
deferrals and investment income.
(2)
Investments in life insurance products. The requirements
of the preceding paragraph apply to investments of deferrals and investment
income in life insurance products except:
(A)
the report is due at least once each calendar year instead
of after each calendar quarter; and
(B)
the period covered by the report may be either the calendar
year or the product year.
(3)
Final reports. If a participant or beneficiary receives
a lump-sum distribution, the prior plan vendor or TPA from whom the lump-sum
distribution is made shall issue a final report to the participant or beneficiary
containing the information required in paragraph (1) of this subsection. The
report must accompany the lump-sum distribution.
(c)
Capital category reports. Once each quarter, or more frequently
if appropriate, a prior plan vendor which is a bank or savings and loan association
shall report to the plan administrator that financial information regarding
capital categories and risk-based ratios described in §87.7(i) and (j)
of this title (relating to prior plan vendor participation).
(d)
Reports and remittance to the plan administrator.
(1)
Frequency and coverage of reports and payment of fees.
Every vendor in the prior plan that has participant or beneficiary deferrals,
investment income, and/or annuitized accounts must ensure that the plan administrator
receives a report no later than the 15th day after the end of each calendar
quarter. Every prior plan vendor must also remit any fees assessed to it by
the plan administrator, no later than the 15th day after the end of each quarter.
Every vendor must ensure that the plan administrator receives a special report
at the end of the fiscal year (August 31st), no later than fifteen days past
fiscal year end - September
5th
[
15th
], in addition
to the normal quarterly reporting schedule. The report must be in the format
specified in this subsection and must cover all transactions during the calendar
quarter.
(2)
Content of reports. For each participant or beneficiary
whose deferrals and investment income are invested in a qualified investment
product offered by the vendor, the report required by this subsection must
contain but is not limited to:
(A)
the participant's or beneficiary's name, agency code and
social security number(s);
(B)
a list of the qualified investment products in which the
participant's or beneficiary's deferrals and investment income have been invested
even if the investment is in a product that is annuitized;
(C)
the amount of monthly deferrals for the reporting period
separated and listed per month;
(D)
the interest and other income earned or lost during the
reporting period through the investment of the deferrals and investment income;
(E)
the amount of federal income tax withheld during the reporting
period;
(F)
the current market value of each participant's or beneficiary's
deferrals and investment income in each qualified investment product, including
annuitized accounts and, including, if appropriate, the number of shares and
per share market value;
(G)
the amount of fees that the prior plan vendor charged during
the reporting period;
(H)
the amount transferred in and out as a result of a change
of product within a company, identified separately by each internal transfer;
(I)
the amount of each plan administrator directed transfer
in or out; and
(J)
the amount of each separate net distribution to the participant
or beneficiaries, except that multiple payments that fall on the same day
should be combined into one account for quarterly reporting purposes.
(K)
a report specifying how the fees assessed to the prior
plan vendor by the plan administrator were calculated and the asset base on
which the fee was based.
(3)
Format of reports.
(A)
All reports must be in the format prescribed by the plan
administrator and follow the DCP quarterly reporting specifications on a:
(i)
5 1/4 or 3 1/2 inch high quality PC diskette;
(ii)
manual form; or
(iii)
electronic file transfer - use of file transfer protocol
(FTP), via the Internet or as an attachment to an electronic mail (E-mail).
(B)
Only prior plan vendors with less than fifty participants
are eligible to report on a manual form.
(C)
Before a prior plan vendor may use a medium other than
a manual form to file a quarterly report with the plan administrator, the
vendor must submit a written request along with a electronic transfer file,
or diskette to the plan administrator. The ERS must approve and make arrangements
with the prior plan vendor prior to testing the electronic file transfer.
The electronic transfer file, or diskette must be in the format and contain
the information prescribed by the DCP reporting specifications and contain
the information that the plan administrator requires including the items listed
in paragraph (d)(2)(A) - (J) of this subsection. Failure to submit data in
the specified format will result in the return of the media without processing.
If the plan administrator determines that the electronic transfer file, or
diskette is inadequate, the plan administrator shall ensure that the number
of participants whose deferrals and investment income are invested at any
given time in the vendor's qualified investment products does not exceed 49.
(D)
The product types must be defined and coded as prescribed
by the plan administrator and as in the DCP quarterly reporting specifications.
(E)
If a participant or beneficiary has invested deferrals
and investment income in two or more qualified investment products offered
by the same prior plan vendor and the products are of the same type, then
the prior plan vendor must report a cumulative total of those deferrals and
investment income.
(4)
A prior plan vendor that fails to submit to the plan administrator
any required report with an authorized signature or the assessed fee will
be subject to formal reprimand. After two formal reprimands, a vendor may
be expelled from the plan and subject to further liability as applicable.
(5)
Late reports and/or fee payment.
(A)
A report or fees are delinquent if the plan administrator
receives the report and/or fees after the due date.
(B)
A report or fees that are received before the due date
but which are returned to the vendor for completion or correction are delinquent
if the plan administrator does not receive the completed or corrected version
of the report or correct amount of fees within 10 days after the original
due date.
(e)
Recordkeeping. A prior plan vendor shall retain records
concerning investments in each qualified investment product by each participant.
The records must be retained until the expiration of the second year after
the prior plan vendor has distributed all the participant's deferrals and
investment income.
(f)
Quarterly reconciliation. In accordance with §87.3(b)(3)(H)
of this title (relating to Participation by State Agencies), an agency coordinator
may be responsible for balancing participant and beneficiary records and reconciling
those records with the data provided by qualified vendors and the plan administrator.
Prior plan vendors shall assist the plan administrator and state agencies
with correcting and explaining any discrepancies. Failure to assist the plan
administrator and state agencies with this reconciliation will be considered
a rules violation, and the plan administrator may take appropriate action
under §87.21 of this title (relating to Remedies).
§87.33.The Economic Growth and Tax Relief and Reconciliation Act.
(a)
The Economic Growth and Tax Relief and Reconciliation Act
of 2001 (referred to as "EGTRRA" and/or "Act") allows a plan administrator
to amend eligible 457 deferred compensation plans to provide additional benefits
to participants. The following resolutions set forth the decisions and provisions
effective January 1, 2002.
(b)
Applicability.
(1)
This section applies to the State of Texas Deferred Compensation
457 Plan as revised and adopted by the Employees Retirement System of Texas
effective September 1, 2000, and filed with the Secretary of State. The plan
as revised and adopted is incorporated into this section. Copies may be obtained
upon request.
(2)
This section also applies to the State of Texas Deferred
Compensation 457 Plan adopted by the Employees Retirement System of Texas
effective January 1, 1991, and as amended prior to adoption of the revised
plan. The 1991 plan is referred to in this section as the "prior plan." Except
as otherwise provided in this section, the provisions of §§87.1
through 87.31 of this title continue to apply to participation agreements,
distribution agreements, and prior plan vendor contracts entered into pursuant
to applicable provisions of the prior plan.
(3)
This section takes effect January 1, 2002 and shall apply
to deferrals, transfers/rollovers and distributions that take place on or
after January 1, 2002.
(c)
Administration of the revised plan. The plan administrator
shall administer the revised plan in the manner provided in the plan and §87.3
of this title (relating to Administrative and Miscellaneous Provisions).
(d)
Catch-up contributions during the three years prior to
normal retirement age are increased to twice the applicable deferral limit.
(e)
A participant age 50 or older during any calendar year
shall be eligible to make additional pre-tax contributions in accordance with
[
Internal Revenue
] Code §414(v) applicable to 457 plans, in
excess of normal deferral amounts. A participant who elects to defer contributions
under the normal catch-up provisions may not also defer under the special
catch-up and [
Internal Revenue
] Code §414(v).
(f)
Plan Loans - The plan administrator is authorized to implement
procedures to establish a loan program for the revised plan. Plan loans shall
be permitted only from assets deposited in the revised plan. Participants
with account balances in the prior plan must transfer those balances to the
revised plan in order to qualify for a plan loan.
(g)
Distributions.
(1)
Change or Cancellation of Irrevocable Distribution Elections
- A participant or a beneficiary of a participant who previously filed an
irrevocable distribution election under the prior plan or under the revised
plan may change that distribution election or cancel that distribution election
by notifying the plan administrator. Such notification must be in writing
and received by the plan administrator at least 30 days prior to the scheduled
distribution date.
(2)
Purchase of Service [
-
]
(A)
A participant may request a trustee-to-trustee
transfer of assets from the prior plan or the revised plan to a governmental
defined benefit plan in the same state or another state for the purchase of
permissible service credit (as defined in [
Internal Revenue
] Code
§414(d), §414(p), and
§415(n)(3)(A)) under such plan
or a repayment to which [
Internal Revenue
]Code §415 does not
apply by reason of subsection (k)(3) thereof.
(B)
Notwithstanding any other provision
contained in this plan, the TPA, at the direction of the plan administrator,
or as requested by a participant or beneficiaries, shall transfer part or
all of the account of any non-terminated participant to the trust forming
the Employees Retirement System of Texas, the Teacher Retirement System of
Texas, the Judicial Retirement System of Texas Plan I or Plan II or any other
eligible retirement plan for the purpose of purchasing service credit, provided
that the recipient trust meets or purports to meet the requirements (as defined
in Code §414(d), §414 (p) and §415(n)(3)(A)) and expressly
permits such transfers to be accepted. In no event may the transfer exceed
the amount necessary to purchase the service credit.
(3)
The TPA and prior plan vendors who maintain participant
account balances in the prior plan shall provide the required [
Internal
Revenue
] Code §402(f) safe harbor notice to all 457 plan participants
or their beneficiaries
prior to the payment of an eligible rollover
distribution.
(h)
Cessation of Deferrals upon Emergency Withdrawal - If the
plan administrator approves a participant's request for an emergency withdrawal,
the participant must agree to cease all deferrals, except deferrals to life
insurance products, to both this plan and the Texa$aver 401(k) plan for six
months following the approval. Participants who were required to suspend deferrals
as a result of an emergency withdrawal and whose suspension has equaled or
exceeded 6 months as of January 1, 2002 may elect to resume contributions
by re-enrolling in the revised plan.
(i)
Qualified Domestic Relations Orders - Upon receipt of a
certified copy of a qualified domestic relations order, the plan administrator
may distribute to an alternate payee in a lump sum immediate distribution,
the proceeds as directed by the order. The plan administrator shall develop
procedures for the implementation of this section.
(j)
The normal maximum amount of deferrals is increased to
the lesser of
$14,000
[
$13,000
] (as periodically adjusted
in accordance with [
Internal Revenue
] Code §457(e)(15)) or
100% of a participant's includible compensation.
(k)
At a participant's
or surviving spouse's
request,
the plan administrator shall process a trustee-to-trustee transfer of an eligible
rollover distribution upon receipt of appropriate instructions from the receiving
plan.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 7, 2005.
TRD-200501031
Paula A. Jones
General Counsel
Employees Retirement System of Texas
Earliest possible date of adoption: April 17, 2005
For further information, please call: (512) 867-7421