RELATES TO:
KRS
161.220 -161.990,
26 U.S.C.
401(a),
402(c),
403(a),
(b),
408,
408A,
414(p),
457(b)
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. This administrative regulation
establishes what constitutes eligible rollover distributions, eligible
retirement plans, distributions, distributees, and direct rollovers for
purposes of compliance with
26 U.S.C.
401(a).
Section 1. "Eligible rollover distribution"
shall include any distribution of all or any portion of the balance to the
credit of the distributee, except:
(1) A
distribution that is one (1) of a series of substantially equal periodic
payments made at least annually:
(a) For the
life or life expectancy of the distributee and the distributee's designated
beneficiary;
(b) The joint lives or
joint life expectancy of the distributee and the distributee's designated
beneficiary; or
(c) For a specified
period of ten (10) years or more;
(2) Any distribution to the extent that the
distribution shall be required pursuant to
26 U.S.C.
401(a)(9), except as
provided in Section 2 of this administrative regulation;
(3) The portion of any distribution that is
not includable in gross income; or
(4) Any other distribution that is reasonably
expected to total less than $200 during the year.
Section 2.
(1) Effective January 1, 2002, a portion of a
distribution shall not fail to be an eligible rollover distribution merely
because the portion consists of after-tax employee contributions that are not
includable in gross income. This portion may be transferred:
(a) Only to:
1. An individual retirement account or
annuity described in
26 U.S.C.
408(a) or
(b);
2. A qualified defined contribution plan
described in
26 U.S.C.
401(a);
3. On or after January 1, 2007, to a
qualified defined benefit plan described in
26 U.S.C.
401(a); or
4. An annuity contract described in
26 U.S.C.
403(b); and
(b) To an account or plan provided
for in paragraph (1)2. through 4. of this subsection that agrees to separately
account for amounts so transferred, and earnings on those amounts, including
separately accounting for the portion of the distribution:
1. That is includable in gross income;
and
2. That is not so
includable.
(2) Effective January 1, 2002, the eligible
rollover distribution shall also include a distribution to a surviving spouse,
or to a spouse or former spouse who is an alternate payee under a qualified
domestic relations order, as defined in
26 U.S.C.
414(p).
(3) "Eligible retirement plan" shall include
any of the following that accepts the distributee's eligible rollover
distribution:
(a) An individual retirement
account described in
26 U.S.C.
408(a);
(b) An individual retirement annuity
described in
26 U.S.C.
408(b);
(c) An annuity plan described in
26 U.S.C.
403(a);
(d) A qualified trust described in
26 U.S.C.
401(a);
(e) Effective January 1, 2002, an annuity
contract described in
26 U.S.C.
403(b);
(f) Effective January 1, 2002, a plan
eligible under
26
U.S.C.
457(b) that is
maintained by a state, political subdivision of a state, or any agency or
instrumentality of a state or a political subdivision of a state that agrees to
separately account for amounts transferred into that plan from the retirement
system; or
(g) Effective January 1,
2008, a Roth IRA described in
26
U.S.C.
408A.
(4)
(a)
"Distributee" shall include an employee or former employee and the following:
1. The employee's or former employee's
surviving spouse; and
2. The
employee's or former employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in
26 U.S.C.
414(p).
(b) Effective January 1, 2007, a
"distributee" shall also include a nonspouse beneficiary who is a designated
beneficiary as defined by
26 U.S.C.
401(a)(9)(E).
1. A nonspouse beneficiary shall rollover the
distribution only to an individual retirement account or individual retirement
annuity established for the purpose of receiving the distribution;
and
2. The account or annuity shall
be treated as an "inherited" individual retirement account or
annuity.
(c) "Direct
rollover" shall include a payment by the plan to the eligible retirement plan
specified by the distributee.
Section 3. In accordance with section
401(a)(31) of the Internal Revenue Code, a distributee may elect, at any time
and in the manner prescribed in this administrative regulation, to have any
portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
