PART 5. TEXAS COUNTY AND DISTRICT RETIREMENT SYSTEM
CHAPTER 103. CALCULATIONS OR TYPES OF BENEFITS
The Texas County and District Retirement System proposes an amendment to §103.10, concerning the distribution of a survivor benefit under Government Code, §844.407. House Bill 1587, as enacted in the 2007 Regular Session of the 80th Legislature, changed the benefit to be actuarially equivalent to the deceased member's accrued benefit and authorized the board to prescribe the forms and manner in which the benefit may be paid. Under this authority the board authorized certain payments to be made as lump sums.
Employer provided benefits are funded over time with the expectation that those benefits would be paid out over time. Although the vast majority of subdivision plans would be unaffected by infrequent and occasional single sum payments, with the decrease in the value of trust assets because of the current worldwide economic downturn, an immediate lump-sum payment from the subdivision's account can in certain instances deplete the subdivision's account below a prudently maintained balance.
In accordance with the statutory authority of the board to prescribe payment forms, the proposed amendment changes the regular form of payment to an estate from a single sum to an installment payment arrangement not extending beyond the last day of the calendar year containing the fifth anniversary of the member's death. This is in compliance with the distribution requirements of the Internal Revenue Code. The installment payment arrangement would be equivalent in value to payment as a single sum as interest (payable from the subdivision's account) would be accruing on unpaid balances. The system is authorized to allow lump-sum payments of the total accrued benefit or the remaining unpaid balance if it determines at that time that a lump sum payment will not harm or injure the funded status of the subdivision's plan.
In addition, the proposed amendment will now allow a designated beneficiary to disclaim their portion of the benefit provided the disclaimer does not cause the benefit to default to the estate. The original rule was adopted to discourage a single designated beneficiary from thwarting the decedent's intent to have the benefit paid in the form of an annuity by disclaiming the benefit as a beneficiary and taking the benefit as the heir to the estate. As proposed, the amendment would permit the remaining designated beneficiaries to share in the disclaimed benefit and still receive their benefits as annuities.
W. James Nabholz, III, General Counsel, has determined that for the first five-year period the rule is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the rule.
Mr. Nabholz has also determined that for each year of the first five years the rule is in effect the public benefit anticipated as a result of administering the rule will be the preservation and protection of accrued benefits. There will be no costs to small businesses. There are no anticipated economic costs to persons who are required to comply with the rule as proposed.
Comments on the proposed amendment may be submitted to W. James Nabholz, III, General Counsel, Texas County and District Retirement System, P.O. Box 2034, Austin, TX 78768-2034.
The rule is proposed under the Government Code, §845.102, which provides the board of trustees with the authority to adopt rules necessary or desirable for efficient administration of the system, and Government Code, §844.407(d) which gives the board authority to specify the form and manner in which a survivor annuity may be paid.
The Government Code, §844.407 is affected by this proposed rule.
§103.10.Survivor Annuity.
(a) The beneficiary of a deceased member who had accumulated at least four years of credited service in the system is eligible to apply for and receive a survivor annuity as described in this section.
(b) The annuity payable under this section to an individual beneficiary shall be the actuarial equivalent, as defined in §841.001(1) of the Act, of the allocated shares of the member's individual account balance and total service credit standing to the credit of the member computed as of the last day of the month preceding the member's death.
(c) An individual designated as beneficiary by the member, or an individual designated as beneficiary under the Act, may elect an annuity to be paid in the form of a life annuity for the beneficiary's life but actuarially reduced to provide a guarantee that the total of all payments will equal or exceed:
(1) the beneficiary's allocated share of the decedent's individual account balance; or
(2) the equivalent of 120 monthly payments; or
(3) the equivalent of 180 monthly payments.
(d) In lieu of an annuity, the beneficiary may elect a refund of the beneficiary's allocated share of the deceased member's individual account.
(e) The annuity shall be calculated using the beneficiary's age on the last day of the month preceding the member's death and computed on the beneficiary's allocated shares of the deceased member's individual account balance and total service credit standing to the credit of the member as of the last day of the month preceding the member's death.
(f) An individual designated as beneficiary by the member, or an individual designated as beneficiary under the Act, may not renounce, repudiate, or disclaim the benefit provided under this section if in doing so the benefit would then become payable to the estate of the deceased member by default rather than by designation , except that in lieu of an annuity, an individual beneficiary may apply for a refund of that beneficiary's share of the deceased member's individual account balance.
(g) In the event that multiple persons are designated
as beneficiaries by the member, the deceased member's individual account
balance and total service credit shall be prorated among all beneficiaries,
and each individual beneficiary may select any payment form described
in subsection (c) of this section, above computed on the shares allocated
to that individual. A beneficiary designated by the member or designated
under the Act that is not an individual will receive
installment payments [a single payment
] as described in subsection (h) of this section.
(h) A designated beneficiary that is not an individual
shall receive an amount [a single payment] equal
to the allocated shares of the member's individual account balance
and total service credit standing to the credit of the member as of
the last day of the month preceding the member's death. The board
authorizes the director, subject to the determination made in subsection
(l) of this section, to cause the amount to be paid in up to sixty
(60) monthly installments, with the final payment made on or before
the last day of the calendar year containing the fifth anniversary
of the member's death. Notwithstanding subsection (k) of this section,
interest shall accrue on unpaid amounts at the rate provided under
the plan beginning from the last day of the month in which all necessary
documents and applications have been filed with and approved by the
system. A distribution payable under this subsection is not considered
to be a service retirement and therefore is not subject to the immediate
transfer requirements of Government Code, §845.316.
(i) A trustee of a trust having a single primary beneficiary may elect with the system, that the beneficiary of the trust be considered as a named beneficiary for purposes of selecting an annuity but such election shall be effective only if the beneficiary of the trust would be considered a named beneficiary for purposes of the rules and regulations of the Internal Revenue Code relating to required minimum distributions.
(j) An individual beneficiary who dies before filing an application for benefits or who fails to file an application within 90 days following notice from the system that a benefit is payable shall be deemed to have selected the life annuity with the guarantee that the total of all payments will equal or exceed the share of the deceased member's individual account balance allocable to the beneficiary.
(k) No interest shall accrue on any benefit payable under this section.
(l) If the director determines that the payment under subsection (h) of this section, of the total accrued benefit or of the unpaid balance of the benefit as a single sum will not harm or injure the funded status of the subdivision's account or jeopardize its ability to pay all benefits as benefits become due, the board authorizes the director to cause the distribution of the total accrued benefit or the remaining unpaid balance as the case may be, to be paid as a single sum in full satisfaction of all amounts due under the plan.
(m) All distributions under this section must comply with the laws and regulations of the Internal Revenue Code.
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 August 3, 2009.
TRD-200903277
W. James Nabholz, III
General Counsel
Texas County and District Retirement System
Earliest possible date of adoption: September 13, 2009
For further information, please call: (512) 637-3355