34 Tex. Admin. Code § 127.7 - Rollovers of Plan Distributions

(a) A distributee may elect, at the time and in the manner prescribed by the Board of Trustees, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

(b) The terms "eligible rollover distribution" and "eligible retirement plan" are defined as follows:

(1) 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 the following:

(A) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or 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 (10) years or more;

(B) any distribution to the extent such distribution is required under § 401(a)(9) of the Internal Revenue Code of 1986, as amended from time to time (the "Internal Revenue Code"); or

(C) the portion of any distribution that is not includible in gross income.

(2) An "eligible retirement plan" includes:

(A) an individual retirement account described in Internal Revenue Code § 408(a);

(B) an individual retirement annuity described in Internal Revenue Code § 408(b);

(C) an annuity plan described in Internal Revenue Code § 403(a);

(D) a qualified trust described in Internal Revenue Code § 401(a) that accepts the distributee's eligible rollover distribution;

(E) an annuity contract described in Internal Revenue Code § 403(b);

(F) an eligible plan under Internal Revenue Code § 457(b), which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this plan; or

(G) for distributions made after December 31, 2007, a Roth IRA as described in Internal Revenue Code § 408A(b).

(3) The definition of eligible retirement plan also shall apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relations order as defined in Internal Revenue Code § 414(p).

(4) A "distributee" includes an employee or former employee. In addition, 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 § 414(p), are distributees with regard to the interest of the spouse or former spouse.

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

(c) Notwithstanding anything in this section to the contrary, a portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax contributions which are not includible in gross income. However, such portion may be paid only in a direct trustee-to-trustee transfer to an individual retirement account or annuity described in Internal Revenue Code §§ 408(a) or (b), or to a qualified defined contribution plan described in Internal Revenue Code § 401(a) or an Internal Revenue Code § 403(b) annuity contract that, in each case, agrees to separately account for amounts so transferred, and the earnings on these amounts, including separate accounting for the portion of such distribution which was includible in gross income (if not for the rollover exclusion) and the portion of such distribution which was not includible in income (determined without regard to the rollover exclusion). Without limiting the foregoing, for distributions made after December 31, 2006, such portion may be also be paid in a direct trustee-to-trustee transfer to any type of qualified plan described in Internal Revenue Code § 401(a) (whether or not a defined contribution plan) that agrees to separately account for amounts so transferred, and the earnings on these amounts, including separate accounting for the portion of such distribution which was includible in gross income (if not for the rollover exclusion) and the portion of such distribution which was not includible in income (determined without regard to the rollover exclusion). Without limiting the foregoing, for distributions made after December 31, 2007, a portion of a distribution shall not fail to be an eligible rollover distribution merely because it is paid in a direct trustee-to-trustee transfer to a Roth IRA as described in Internal Revenue Code § 408A(b).

(d) Rollovers by Nonspouse Beneficiaries. Effective for distributions on or after January 1, 2010, a member's beneficiary who is not the surviving spouse of the deceased member may elect to have an eligible rollover distribution paid directly to an eligible retirement plan that is an inherited individual retirement account described in Internal Revenue Code § 408(d)(3)(C) to the extent permitted by Internal Revenue Code § 402(c)(11).

(e) The Board, the system and its employees and agents are not responsible for assuring that the distributee is eligible to make a rollover or for the tax consequences of any such rollover.

Notes

34 Tex. Admin. Code § 127.7

The provisions of this §127.7 adopted to be effective April 20, 2003, 28 TexReg 3058; amended to be effective March 22, 2012, 37 TexReg 1914; Amended by Texas Register, Volume 42, Number 52, December 29, 2017, TexReg 7721, eff. 1/7/2018; Adopted by Texas Register, Volume 48, Number 30, July 28, 2023, TexReg 4125, eff. 8/1/2023