Or. Admin. Code § 459-050-0080 - Distribution of Funds After a Severance of Employment
The purpose of this rule is to establish the criteria and process for obtaining a distribution of deferred compensation funds after a participant's severance of employment as defined herein. Distribution under the Deferred Compensation Program shall be made in accordance with any minimum distribution or other limitations required by Internal Revenue Code (IRC) section 401(a)(9), 26 U.S.C. 401(a)(9) and related regulations.
(1) Definitions. The
following definitions apply for the purpose of this rule:
(a) "Commencement date" means the month and
year that a participant will begin receiving a distribution(s) from the
Deferred Compensation Program, whether by operation of the participant's
election or under the terms of the plan. The commencement date is not the date
that the necessary funds are liquidated for distribution.
(b) "Date of distribution" means the date
funds are distributed to the participant, alternate payee, beneficiary, or
other recipient in accordance with the plan, regardless of the mechanism by
which those funds are distributed.
(c) "Intention to return to work" means a
written or oral, formal or informal agreement has been made with the plan
sponsor to return to work on a full time, part time or temporary basis at the
time the severance is effective. If a participant returns to work with the plan
sponsor within 30 calendar days of severance, then a rebuttable presumption
exists that the participant intended to return to work as of the date of
severance.
(d) "Liquidation date"
means the date the Deferred Compensation Program designates for liquidation of
funds. Generally, the liquidation date will not be earlier than the 25th day of
the calendar month preceding the commencement date. The Deferred Compensation
Program may determine the liquidation date based on normal business practices.
The Deferred Compensation Program is not liable to a participant for failure to
liquidate an investment on a specified date.
(e) "Liquidation of funds" means the
conversion of the necessary funds from the investments in the Deferred
Compensation Program into cash for payment under a specified manner of
distribution.
(f) "Manner of
distribution" means the manner elected by the participant, alternate payee, or
beneficiary in accordance with the terms of the plan, in which a distribution
is to be paid out of the Deferred Compensation Program.
(g) "Required beginning date" means April 1
of the calendar year following the later of:
(A) The calendar year in which the
participant:
(i) 70-1/2 years of age in 2019
or earlier,
(ii) 72 years of age in
calendar years 2020 through 2022,
(iii) 73 years of age in calendar years 2023
through 2032, and
(iv) 75 years of
age beginning in 2033 and later, or
(B) The calendar year in which the
participant retires.
(h)
"Severance of Employment" means a participant has ceased rendering services as
an employee or an independent contractor of a plan sponsor for a minimum of 30
consecutive days, including services as a temporary employee, and has no
intention to return to work for the plan sponsor.
(2) Manner of distribution. Subject to the
provisions of sections (3) through (5) set out below, a participant, surviving
beneficiary, or alternate payee may elect a manner of distribution, designate
one or more beneficiaries, and change beneficiaries at any time. The total
amount distributed may not exceed the total account value. The following
manners of distribution are available:
(a)
Total distribution of the account value in a lump sum;
(b) Single distribution of a portion of the
account value in a lump sum. Funds not distributed shall continue to receive
earnings or losses based on the performance of investment option(s) in which
funds are held;
(c) Systematic
withdrawal distribution for a specific number of years, which may be paid
annually, semiannually, quarterly or monthly. Any funds remaining after each
periodic payment shall continue to receive earnings or losses based on the
performance of investment option(s) in which the funds are held. The remaining
number of periodic distributions may not change. However, the amount of
distributions shall be adjusted depending on the earnings or losses
experienced;
(d) Periodic specified
dollar amount distribution. This distribution may be paid annually,
semiannually, quarterly or monthly, and may be paid in specific dollar amounts
in $200 increments. Any funds remaining after each periodic payment shall
continue to receive earnings or losses based on the performance of investment
option(s) in which the funds are held. The amount of each periodic distribution
will remain the same throughout the withdrawal period. However, the withdrawal
period may vary depending on the earnings or losses experienced;
(e) Required minimum distribution, which will
provide an annual distribution of the minimum amount required in IRC section
401(a)(9), 26 U.S.C.
401(a)(9). This manner of
distribution is available only to those who defer distribution to their
required beginning date or a participant who continues to work and severs
employment after their required beginning date. Funds not distributed shall
continue to receive earnings or losses based on the performance of investment
option(s) in which funds are held;
(f) Mandatory single lump-sum distribution of
an account balance of less than $1,000. This distribution shall be made to any
participant or alternate payee with an account balance of less than $1,000
within one year of the participant's severance of employment.
(3) Application Requirements.
Application shall be made on forms provided by, or other methods approved by,
the Deferred Compensation Program. No distribution may be paid unless a timely
and complete application is filed with the Deferred Compensation Program as
follows:
(a) An application for distribution
or to change the manner of distribution will be considered filed in a timely
manner if it is received in writing or other method approved by the Deferred
Compensation Program at least 30 days before the requested commencement date.
The commencement date may be no earlier than the second calendar month
following the month of severance of employment.
(b) An application for distribution or to
change the manner of distribution may be made by a participant, surviving
beneficiary, or alternate payee or the authorized representative of a
participant, surviving beneficiary or alternate payee. A valid document
appointing an authorized representative such as a power of attorney,
guardianship or conservatorship appointment, must be submitted to the Deferred
Compensation Program. The Deferred Compensation Program retains the discretion
to determine whether the document is valid for purposes of this rule.
(c) Except in the case of a qualified
distribution as defined in section
402A(d)(2) of the
Internal Revenue Code, the participant, surviving beneficiary, or alternate
payee must file a tax-withholding certificate with the Deferred Compensation
Program at least 30 days before the requested commencement date. If the
certificate is not filed, the Deferred Compensation Program shall withhold
state income taxes based on a marital status of single and no dependents and
federal income taxes based on a marital status of married and 3 dependents, or
other federally mandated tax withholding requirements. A new certificate may be
filed at any time, and will be applied to distributions paid on and after the
first calendar month following the date received or as soon as reasonably
possible.
(d) When direct deposit
is permitted under the Deferred Compensation Program, a request for periodic
distributions to be transmitted to a financial institution for direct deposit
must be made using a Deferred Compensation Program Automatic Deposit
Agreement.
(e) Distribution of
deferred compensation funds will occur no later than five days following the
date funds necessary for a specified payment were liquidated. Liquidation of
funds will be done on a pro-rata basis determined by the investment allocation
of an account at the time the funds are liquidated or from the Stable Value
account, at the participant's election. The election must be filed before the
participant begins receiving distributions. If the participant elects
distribution from the Stable Value account and there are insufficient funds in
that account on the date of each distribution (whether monthly, quarterly,
semi-annually, or annually), the distribution will be done on the pro-rata
basis described above regardless of the participant's election.
(4) Denial of distribution
election. The Deferred Compensation Program may deny any distribution election
if that denial is required to maintain the status of the Deferred Compensation
Program under the Internal Revenue Code and regulations adopted pursuant to the
Internal Revenue Code and ORS Chapter 243.
(5) Changing the manner of distribution. A
participant, surviving beneficiary or alternate payee may change or discontinue
the manner of distribution only as follows and subject to the requirements of
section (3) above:
(a) Manners of distribution
under sections (2)(c), (2)(d) and (2)(e) of this rule may be changed at any
time upon application as required under section (3) of this rule.
(b) Distributions under sections (2)(c) and
(2)(d) of this rule may be discontinued upon written notification or by other
methods approved by the Deferred Compensation Program. The participant,
surviving beneficiary, or alternate payee must submit an application, as
required in section (3) of this rule, to restart distributions and elect a
manner of distribution for the remaining account.
(c) Subject to the requirements of this rule,
a participant, surviving beneficiary or alternate payee who has commenced
receiving a required minimum distribution may apply under the requirements of
section (3) of this rule:
(A) For one or more
additional distributions in a lump sum not to exceed the total value of the
account; and
(B) To change the
manner of distribution so long as future distributions will be continuous and
equal to or greater than the minimum distribution required.
Notes
Statutory/Other Authority: ORS 243.470
Statutes/Other Implemented: ORS
243.401-243.507, OL 2007 Ch. 54 &
Pub. L. No.
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