RELATES TO:
KRS
161.716,
161.600,
161.470,
26 C.F.R., 26 C.F.R. 401(a)(7),(8), (25),
26 U.S.C. 414(d),
(p), (u),
26 U.S.C.
401(a),
414(d),
414(p),
414(u),
503(b),
3401(h),
38 U.S.C.
4301-4335
NECESSITY, FUNCTION AND CONFORMITY:
KRS
161.310(1) requires the
board of trustees to promulgate administrative regulations for the
administration of the funds of the retirement system and for the transaction of
business.
KRS
161.716 requires the board of trustees to
promulgate administrative regulations as are necessary to remove any conflicts
with federal laws and to protect the interests of the members and survivors of
the members of the retirement system. Kentucky Teachers' Retirement System
shall administer the Retirement System as a qualified defined benefit plan
pursuant to
26 U.S.C.
401(a) and
26 U.S.C.
414(d) of the Internal
Revenue Code, 26 U.S.C., 26 C.F.R., and such other Internal Revenue Code
Sections as applicable. This administrative regulation establishes Kentucky
Teachers' Retirement System's compliance with
26 U.S.C.
401(a) and
503(b)
in order for the Kentucky Teachers' Retirement System to maintain its tax
qualified status as a public defined benefit plan. This administrative
regulation also includes provisions intended to comply with the Heroes Earnings
Assistance and Relief Tax Act of 2008, "HEART Act". This administrative
regulation adds provisions that have been required as part of the determination
letter process regarding vested benefits.
Section
1. Compliance with
26 U.S.C.
401(a)(7) and (8) for
Vesting and Forfeitures.
(1) A plan member
shall be 100 percent vested in the member's accumulated contributions at all
times.
(2)
(a) In conformity with
26 U.S.C.
401(a)(8), a forfeiture of
benefits by a member or former member of the plan shall not be used to pay
benefit increases.
(b) Forfeitures
shall be used to reduce employer contributions.
(3) Upon termination or partial termination
of the Kentucky Teachers' Retirement System, or the complete discontinuance of
contributions, a member shall have a nonforfeitable interest in his accrued
benefit to the extent funded.
(4)
In order to comply with Internal Revenue Service interpretations, subject to
the provisions of
KRS
161.470, a member shall have a nonforfeitable
interest in his accrued benefit at attainment of age sixty (60) with the
completion of five (5) years of service.
(5) Subject to the provisions of
KRS
161.470, a member who completes at least five
(5) years of service and terminates employment shall be vested in his accrued
benefit and shall be entitled to that benefit upon the attainment of normal
retirement age, which is age sixty (60), unless the member withdraws his
accumulated contributions.
Section
2. Compliance with
26 U.S.C.
414(p) for Qualified
Domestic Relations Orders. If benefits are payable pursuant to a qualified
domestic relations order that meets the requirements of a domestic relations
order as defined in
26 U.S.C.
414(p), then the applicable
requirements of
26 U.S.C.
414(p) shall be followed by
the retirement system.
Section 3.
Compliance with
26 U.S.C.
414(u) for Reemployed
Veterans.
(1) Effective December 12, 1994,
Contributions, benefits, and service credit with respect to qualified military
service shall be governed by
26 U.S.C.
414(u) and the Uniformed
Services Employment and Reemployment Rights Act of 1994,
38 U.S.C.
4301 -
4335.
(2) Effective with respect to deaths
occurring on or after January 1, 2007, while a member is performing qualifying
military service, as defined in
38 U.S.C. Chapter 43 to the extent required by
section
26 U.S.C.
401(a)(37) of the Internal
Revenue Code, survivors of a member of the Kentucky Teachers' Retirement System
shall be entitled to any additional benefits that the system would provide if
the member had resumed employment and then died, such as accelerated vesting or
survivor benefits that are contingent on the member's death while
employed.
(3) Beginning January 1,
2009, to the extent permitted by
26
U.S.C. 3401(h) and
414(u)(2)
of the Internal Revenue Code, an individual receiving differential wage
payments (while the individual is performing qualified military service, as
defined in
38 U.S.C. Chapter 43) from an employer shall be treated as employed
by that employer and the differential wage payment shall be treated as annual
compensation. This provision shall be applied to all similarly situated
individuals in a reasonably equivalent manner.
Section 4. Compliance with
26 U.S.C.
503(b) for Prohibited
Transactions. The board shall not engage in a transaction prohibited by
26 U.S.C.
503(b).
Section 5. Compliance with
26 U.S.C.
401(a)(25) for Actuarial
Assumptions.
(1) Kentucky Teachers'
Retirement System shall comply with
26 U.S.C.
401(a)(25) to determine the
amount of any benefit that is determined on the basis of actuarial assumptions
using assumptions adopted by the board by resolution for specific benefit
calculation purposes.
(2) These
benefits shall not be subject to employer discretion.
