34 Tex. Admin. Code § 87.5 - Participation by Employees
(a) Benefits of
participation. The plan administrator shall cease to accept deferrals to
investment products approved under the prior plan, with exception of life
insurance products on or after September 1, 2000. Subject to any changes in
federal law:
(1) a participant's deferrals
are not subject to federal income taxation until the deferrals are paid or
otherwise made available to the participant; and
(2) investment income is not subject to
federal income taxation until it is paid or otherwise made available to the
participant.
(b)
Enrollment of participants in the plan.
(1)
An employee may complete an enrollment form, enroll online or enroll through
customer service representative at the TPA in the revised plan.
(2) If a participant has not selected an
investment product to receive deferrals, the deferrals shall be invested in a
product selected by the plan administrator at its sole discretion.
(c) Effective date of enrollment.
A participant's enrollment in the Plan is effective for compensation earned
beginning with the month following the month in which the participant
enrolls.
(d) Eligibility. Employees
are eligible to participate in the plan and defer compensation immediately upon
becoming employed by a state agency. Employees of community colleges and junior
colleges are eligible only if such community college or junior college has
opted to participate in the Texa$aver 457 plan.
(e) Contents of a participation agreement
used in the prior plan. A participation agreement must contain but shall not be
limited to:
(1) the participant's consent for
payroll deductions equal to the amount of deferrals during each pay
period;
(2) the amount that will be
deducted from the participant's compensation during each pay period;
(3) the prior plan vendor and qualified
investment product in which the participant's deferrals will be
invested;
(4) the date on which the
payroll deductions will begin or end, as appropriate;
(5) the signature of an individual with
authority to bind the prior plan vendor;
(6) the signature of an individual with
authority to bind the participant; and
(7) an incorporation by reference of the
requirements of state law and the sections in this chapter.
(f) Participants with existing
life insurance products.
(1) This paragraph
is effective until December 31, 1998. When a participant has deferrals and
investment income in a life insurance product, the state of Texas:
(A) retains all of the incidents of ownership
of the life insurance product;
(B)
is the sole beneficiary of the life insurance product;
(C) is not required to transfer the life
insurance product to the participant or the participant's beneficiary;
and
(D) is not required to pass
through the proceeds of the product to the participant or the participant's
beneficiary.
(2) This
paragraph is effective January 1, 1999, and thereafter. When a participant has
deferrals and investment income in a life insurance product, the life insurance
product shall be held in trust for the exclusive benefit of the participant and
beneficiaries.
(g)
Normal maximum amount of deferrals.
(1) The
amount a participant defers during each tax year may not exceed the normal
maximum amount of deferrals.
(2)
The normal maximum amount of deferrals is the maximum amount allowed by the
Internal Revenue Service (as periodically adjusted for cost-of-living in
accordance with Code §457(e)(15)), §415(d), the Job Creation and
Worker Assistance Act of 2002 and the Pension Protection Act of 2006, or 100%
of a participant's includible compensation.
(3) The participant's employing agency will
monitor the annual deferral limits for each plan participant to ensure the
maximum annual deferral limit is within the maximum amount allowed by the
Internal Revenue Service or 100% of a participant's includible income is not
exceeded. Any state agency or employing agency that is uncertain what the
appropriate maximum annual deferral limit is for a calendar year should contact
the plan administrator to obtain that information. Each participant enrolling
in the plan must provide the employing state agency any information necessary
to ensure compliance with plan requirements, including, without limitation,
whether the employee is a participant in any other eligible plan. If a
participant makes deferrals in excess of the normal maximum annual deferral
limit and is not participating under the catch-up provision, the following
actions will be taken:
(A) Upon notification
by the participant's agency, the prior plan vendor or TPA will return to the
participant's agency the amount of deferrals in excess of the normal plan
limits, that is, any amount exceeding the maximum amount allowed by the
Internal Revenue Service or 100% of the participant's includible income without
any reduction for fees or other charges.
(B) Upon receipt of the funds, the
participant's agency will reimburse the participant through its payroll
system.
(4) If any
deferral (or any portion of a deferral) is made to the plan by a good faith
mistake of fact, then within one year after the payment of the deferral, and
upon receipt in good order of a proper request approved by the plan
administrator, the amount of the mistaken deferral (adjusted for any income or
loss in value, if any, allocable thereto) shall be returned directly to the
participant or, to the extent required or permitted by the plan administrator,
to the participant's employing state agency.
(5) Disregard excess deferral. A participant
is treated as not having deferred compensation under a plan for a prior taxable
year to the extent excess deferrals under the plan are distributed, as
described in paragraph (4) of this subsection. To the extent that the combined
deferrals for pre-2002 years exceeded the maximum deferral limitations, the
amount is treated as an excess deferral for those prior years.
(h) Three-year catch-up exception
to the normal maximum amount of deferrals.
(1) This subsection provides a limited
exception to the normal maximum amount of deferrals.
(2) In the event that a participant chooses
to begin the three-year catch-up option, the participant is required to
complete and provide the plan administrator with a copy of the three-year
catch-up provision agreement form.
(3) In this subsection, the term "normal
retirement age" for any participant means a range of ages:
(A) beginning with the earliest age at which
a person may retire under the participant's basic pension plan:
(i) without an actuarial or similar reduction
in retirement benefits; and
(ii)
without the state's consent for the retirement; and
(B) ending at age 70.5.
(C) A participant who is a police officer or
firefighter (defined in Code §415(b)), may designate a normal retirement
age that is earlier than that described above, but in any event may not be
earlier than age 40.
(4)
If a participant works beyond age 70.5, the normal retirement age for the
participant is the age designated by the participant, which, in this instance,
may not be later than the participant's separation from service.
(5) For any or all of the last three full
taxable years ending before the taxable year in which a participant attains
normal retirement age, the maximum amount that the participant may defer for
each tax year is the lesser of:
(A) twice the
annual §457(g) deferral limit as adjusted, or
(B) the sum of:
(i) the normal maximum amount of deferrals
for the current year plus each prior calendar year beginning after December 31,
2001, during which the participant was an employee under the plan, minus the
aggregate amount of compensation that the participant deferred under the plan
during such years, plus
(ii) the
normal maximum amount of deferrals that the participant did not use in prior
tax years commencing December 31, 1978 and before January 1, 2002, provided the
participant was eligible to participate in the plan, minus the aggregate
contributions to pre-2002 coordination plans during those years.
(6) The participant's
employing agency will calculate and monitor all three-year catch-up limits and
furnish the plan administrator with the applicable three-year catch-up forms.
If a participant makes deferrals in excess of the participant's three-year
catch-up limit, the following actions will be taken.
(A) Upon notification by the participant's
agency, the prior plan vendor or TPA will return to the participant's agency,
the amount of deferrals in excess of the three-year catch-up limit without any
reduction for fees or other charges.
(B) Upon receipt of the funds, the
participant's agency will reimburse the participant through its payroll
system.
(7) This
subsection applies only if the participant has not previously used the
three-year catch-up exception with respect to a different normal retirement age
under the plan or another deferred compensation plan governed by the Code
§457.
(8) If a participant
makes deferrals in excess of the normal plan limits under the three-year
catch-up provision during or after the calendar year in which the participant
reaches normal retirement age, the following actions will be taken.
(A) Upon notification by the participant's
state agency, the prior plan vendor or TPA will return to the participant's
state agency, the amount of deferrals in excess of the normal plan limits, that
is, any amount exceeding the maximum amount allowed by the Internal Revenue
Service (as adjusted in accordance with Code §457(e)(15) or 100% of a
participant's includible compensation) without any reduction for fees or other
charges.
(B) Upon receipt of the
funds, the participant's state agency will reimburse the participant through
its payroll system.
(9)
Over age 50 catch-up. A participant age 50 or older during any calendar year
shall be eligible to make additional pre-tax contributions in accordance with
Code §414(v) applicable to 457 plans, in excess of normal deferral
amounts. A participant may make an additional contribution over and above the
applicable deferral limit. The additional contribution is $5,000 for 2006.
After 2006, the amount of the "Over age 50 and over catch-up" will be indexed
in $500 increments based upon cost-of-living adjustments. A participant who
elects to defer contributions under the normal three-year catch-up provisions
may not also defer under the special Over age 50 catch-up and Code §414(v)
and §457.
(10) Special post
severance compensation under Code §415 effective January 1, 2007. A
participant may elect to defer compensation paid within 2 1/2 months following
separation from service in accordance with Code §415. Types of
compensation include:
(A) accumulated bona
fide sick pay, vacation pay, back pay or other leave, but only if the
participant would have been able to use the leave if employment had
continued;
(B) payments for
commissions, bonuses, overtime and shift differential pay, but only if these
would have been paid and are regular compensation for services
rendered;
(C) compensation paid to
participants who are permanently and totally disabled; and
(D) compensation relating to qualified
military or other service (Reg.1.457-4(d)(1), Uniformed Services Employment and
Reemployment Rights Act of 1994 (USERRA), Code §414(u) and the Pension
Protection Act of 2006).
(i) Changes before a participant becomes
entitled to a distribution.
(1) A participant
may change the amount of deferral at any time.
(2) A participant must execute a change
agreement for the prior 457 Plan funds and file the agreement with the
participant's benefits coordinator when the participant:
(A) initiates a transfer;
(B) changes the participant's primary or
secondary beneficiary, or both; or
(C) performs a combination of the items
specified in subparagraphs (A) or (B) of this paragraph.
(3) Upon receipt of a participation agreement
or change agreement, the benefits coordinator shall review the agreement to
determine whether it complies with the sections in this chapter.
(A) With a participant's enrollment, the
benefits coordinator shall take the action necessary for payroll
initiation.
(B) If a change
agreement complies, the benefits coordinator shall send the agreement to the
plan administrator.
(4)
This paragraph applies to changes of beneficiaries, changes of the prior plan
vendor or qualified investment product that receives a participant's deferrals,
and changes to the amount a participant defers per pay period. An executed
change agreement or participation agreement is effective beginning with the
month following the month in which the benefits coordinator receives the
agreement from the participant.
(5)
This paragraph applies to transfers. An executed change agreement is effective
on the date that the transfer procedures specified in §
87.15 of this title (relating to
Transfers) have been completed.
(j) Conflict in beneficiary designations. The
designation of a primary or secondary beneficiary, or both, in a beneficiary
designation form, participation agreement, change agreement, or distribution
agreement prevails over a conflicting designation in any other
document.
(k) A beneficiary
designation that names a former spouse is invalid unless the designation is
completed after the date of divorce and received by the plan
administrator.
(l) Paid leave of
absence. Deferrals may continue during a participant's paid leave of absence,
to the extent that compensation continues.
(m) Unpaid leave of absence. If a participant
separates from service or takes a leave of absence from the state because of
service in the military and does not receive a distribution of his or her
account balances, the Plans will allow suspension of loan repayments until
after the conclusion of the period of military service.
(n) Military service. Participants on a leave
of absence due to qualified military service under Code §414(u) may elect
to make additional annual deferrals upon resumption of employment with the
state equal to the maximum annual deferrals that the participant could have
elected during that period if employment had continued (at the same level of
compensation) without the interruption or leave, reduced by the annual
deferrals, if any. This right applies for five years following the resumption
of employment (or if sooner, for a period equal to three times the period of
the interruption or leave). To qualify for USERRA, final USERRA regulations
(January 18, 2006) benefits and the Pension Protection Act of 2006, the
employee must return to employment with the original employer within certain
specified timelines based on the length of his or her service. If less than 31
days, the employee must report to work no later than the beginning of the first
full work period on the first full calendar day following discharge, allowing
reasonable time required to return home safely and an eight (8) hour rest
period. If more than 30 days but less than 181 days, the employee must return
to employment no later than 14 days following discharge. If more than 180 days,
the employee must return to employment no later than 90 days following
discharge. A serviceman called up for action between September 11, 2001 and
December 31, 2007 for more than 179 days may take the later of two years after
the end of active service to make up annual contributions, distributions or
payback loans. A tax refund or credit may be allowed if filed before the close
of such period.
(o) Disability. A
disabled participant may elect to defer compensation during any portion of the
period of his or her disability to the extent that he or she has actual
compensation (not imputed compensation and not disability benefits) from which
to make contributions to the plan and has not had a separation from
employment.
(p) Termination and
resumption of deferrals.
(1) An employee may
voluntarily terminate additional deferrals to the prior plan by completing a
participation agreement or by contacting his or her benefits
coordinator.
(2) An employee who
returns to active service after a separation from service must enroll in the
revised plan before deferrals may resume.
(q) Ownership of deferrals and investment
income.
(1) Until December 31, 1998, a
participant's deferrals and investment income are the property of the state of
Texas until the deferrals and investment income are actually distributed to the
employee.
(2) Effective January 1,
1999, in accordance with Chapter 609, Texas Government Code and Code
§457(g), all amounts currently and hereafter held under the plan,
including deferrals and investment income, shall be held in trust by the Board
of Trustees for the exclusive benefit of participants and their beneficiaries
and may not be used for or diverted to any other purpose, except to defray the
reasonable expenses of administering the plan. In its sole discretion, the
Board of Trustees may cause plan assets to be held in one or more custodial
accounts or annuity contracts that meet the requirements of Code §457(g),
and §401(f). In addition, effective January 1, 1999, the Board of Trustees
does hereby irrevocably renounce, on behalf of the state of Texas and
participating state agencies, any claim or right which it may have retained to
use amounts held under the plan for its own benefit or for the benefit of its
creditors and does hereby irrevocably transfer and assign all plan assets under
its control to the Board of Trustees in its capacity as the trustee of the
trust created hereunder. It shall be impossible, prior to the satisfaction of
all liabilities with respect to participants and their beneficiaries, for any
part of the assets and income of the trust fund to be used for, or diverted to,
purposes other than for the exclusive benefit of participants and their
beneficiaries. Adoption of this rule shall constitute notice to prior plan
vendors holding assets under the plan to change their records effective January
1, 1999, to reflect that assets are held in trust by the Board of Trustees for
the exclusive benefit of the participants and beneficiaries. Failure of a
vendor to change its records on a timely basis may result in the expulsion of
the vendor from the plan.
(r) Market risk and related matters.
(1) The plan administrator, the trustee, an
employing state agency, or an employee of the preceding are not liable to a
participant if all or part of the participant's deferrals and investment income
are diminished in value or lost because of:
(A) market conditions;
(B) the failure, insolvency, or bankruptcy of
an investment provider; or
(C) the
plan administrator's initiation of a transfer or investment of deferrals in
accordance with the sections in this chapter.
(2) A participant is solely responsible for
monitoring his or her own investments and being knowledgeable about:
(A) the financial status and stability of the
investment provider in which the participant's deferrals and investment income
are invested;
(B) market
conditions;
(C) the resulting cost
of making a transfer or distribution from a qualified investment
product;
(D) the amount of the
participant's deferrals and investment income that are invested in an
investment provider's qualified investment products;
(E) the riskiness of a qualified investment
product; and
(F) the federal tax
advantages and consequences of participating in the plan and receiving
distributions of deferrals and investment income.
(s) Alienation of deferrals and
investment income. A participant's deferrals and investment income may not be:
(1) assigned or conveyed;
(2) pledged as collateral or other security
for a loan;
(3) attached,
garnished, or subjected to execution; or
(4) conveyed by operation of law in the event
of the participant's bankruptcy, or insolvency.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.