840 CMR, § 3.07 - Internal Revenue Code Section 401(a)(31)

840 CMR 3.07 applies to distributions made on or after January 1, 1993 by a retirement system subject to M.G.L. c. 32, provided that any regulations adopted by a retirement board that applied the rules of Code Section 401(a)(31) to distributions from its system shall be deemed to apply in lieu of 840 CMR 3.07. Notwithstanding any contrary provision or retirement law that would otherwise limit a distributee's election under 840 CMR 3.07, a distributee may elect, at the time and in the manner prescribed by the retirement board, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

(1) Eligible Rollover Distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or the life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Internal Revenue Code Section 401(a)(9); the portion of any distribution that is not includible in gross income; and any other distribution that is reasonably expected to total less than $200 during the year. Effective January 1, 2002, a portion of a distribution will not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions that are not includible in gross income. However, such portion may be transferred only:

(a) to an individual retirement account or annuity described in Internal Revenue Code Section 408(a) or (b), or to a qualified defined contribution plan described in Internal Revenue Code Section 401(a) that agrees to separately account for amounts so transferred (and earnings thereon), including separately accounting for the portion of the distribution that is includible in gross income and the portion of the distribution that is not so includible;

(b) on or after January 1, 2007, to a qualified defined benefit plan described in Internal Revenue Code Section 401(a) or to an annuity contract described in Internal Revenue Code Section 403(b), that agrees to separately account for amounts so transferred (and earnings thereon), including separately accounting for the portion of the distribution that is includible in gross income and the portion of the distribution that is not so includible; or

(c) on or after January 1, 2008, to a Roth IRA described in Internal Revenue Code Section 408A.

(2) Eligible Retirement Plan: An eligible retirement plan is:

(a) effective January 1, 2002, a plan eligible under Internal Revenue Code Section 457(b) that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state that agrees to separately account for amounts transferred into the plan from the retirement system,

(b) an individual retirement account described in Internal Revenue Code Section 408(a),

(c) an individual retirement annuity described in Internal Revenue Code Section 408(b),

(d) an annuity plan described in Internal Revenue Code Section 403(a),

(e) effective January 1, 2002, an annuity contract described in Internal Revenue Code Section 403(b),

(f) a qualified trust described in Internal Revenue Code Section 401(a), that accepts the distributee's eligible rollover distribution, or

(g) effective January 1, 2008, a Roth IRA described in Internal Revenue Code Section 408A.

(h) effective December 19, 2015, a SIMPLE IRA described in Internal Revenue Code Section 408(p), provided that the rollover contribution is made after the two-year period described in Internal Revenue Code Section 72(t)(6).

(3) Effective January 1, 2002, the definition of eligible rollover distribution also includes a distribution to a surviving spouse (as defined by federal law), or to a spouse or former spouse who is an alternate payee under a domestic relations order, as defined in Internal Revenue Code Section 414(p).

(4) Distributee. A distributee includes an employee or former employee. It also includes the employee's or former employee's surviving spouse and 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 Internal Revenue Code Section 414(p). Effective January 1, 2007, it further includes a nonspouse beneficiary who is a designated beneficiary as defined by Internal Revenue Code Section 401(a)(9)(E). However, a nonspouse beneficiary may rollover the distribution only to an individual retirement account or individual retirement annuity established for the purpose of receiving the distribution and the account or annuity will be treated as an "inherited" individual retirement account or annuity.

(5) Direct Rollover. A direct rollover is a payment by the retirement system to the eligible retirement plan specified by the distributee.

Notes

840 CMR, § 3.07

Amended by Mass Register Issue 1497, eff. 6/9/2023.