Current through Register Vol. 50, No. 9, March 1, 2024
RELATES TO:
KRS
16.505,
16.543,
16.577,
16.578,
16.583,
61.505,
61.510,
61.542,
61.543,
61.552,
61.559,
61.565,
61.592,
61.5955,
61.597,
61.615,
61.625,
61.637,
61.640,
61.680,
61.702,
78.510,
78.545,
78.5510,
78.5512,
78.5514,
78.5516,
78.5520,
78.5528,
78.5532,
78.5536,
78.5540,
78.5542,
78.615,
78.635,
38 U.S.C.
4301-4335,
26 U.S.C. 414(u)
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
61.505(1)(g) authorizes the
Kentucky Public Pensions Authority on behalf of the Kentucky Retirement Systems
and the County Employees Retirement System to promulgate administrative
regulations that are consistent with the provisions of
KRS
16.505 to
16.652,
61.510 to
61.705, and
78.510 to
78.852.
KRS
16.583,
61.597,
78.5512, and
78.5516 create a hybrid cash
balance plan tier for members of the State Police Retirement System, Kentucky
Employees Retirement System, and County Employees Retirement System with
participation dates on or after January 1, 2014, or members making an election
pursuant to KRS
61.5955 and
78.545. This administrative
regulation establishes the procedures and requirements for the administration
of the hybrid cash balance plan tier.
Section
1. Definitions.
(1) "Nonvested
member" means a member of the Systems who has less than five (5) years of
service credited under
KRS
16.543,
61.543, and
78.615 and who participates in
the hybrid cash balance plan tier based on:
(a) A participation date on or after January
1, 2014, or
(b) Opting into the
hybrid cash balance plan with a participation date between September 1, 2008
and December 31, 2013.
(2) "Vested member" means a member of the
Systems who has five (5) or more years of service credited under
KRS
16.543,
61.543, and
78.615 and who participates in
the hybrid cash balance plan tier based on:
(a) A participation date on or after January
1, 2014, or
(b) Opting into the
hybrid cash balance plan with a participation date between September 1, 2008
and December 31, 2013.
Section 2. Military Service Credit.
(1)
(a)
Decompression service shall mean service purchased by a member for a period of
time not to exceed ninety (90) days between the member's discharge from
active-duty military service and the member's return to employment with a
participating employer, if the member returned from military leave and did not
immediately return to work, in accordance with the Uniformed Services
Employment and Reemployment Rights Act (USERRA),
38 U.S.C.
4301-4333.
(b) Decompression shall be credited to the
member's account after the member has paid the employee contributions that
would have been paid by the member for this period of time in accordance with
KRS
16.543,
61.543, and
78.615.
(c) The employer shall pay the employer
contributions for the period of decompression in accordance with
KRS
61.565 and
78.635.
(2)
(a)
Military omitted service shall mean service purchased by a member with a
participation date on or after January 1, 2014, who was called to active-duty
military in accordance with
KRS
61.552(1) and
78.545.
(b) Military omitted shall be credited to the
member's account only if the member has paid the employee contributions that
would have been paid by the member for this period of time in accordance with
KRS
16.543,
61.543, and
78.615.
(c) The employer shall pay the employer
contributions for the period of military omitted in accordance with
KRS
61.565 and
78.635.
Section 3. Application.
(1) Systems. This administrative regulation
shall apply to the hybrid cash balance plan tier within each of the
Systems.
(2) Members. Except as
provided in subsections (3) and (4) of this section, this administrative
regulation shall apply solely to members who begin participating in the Systems
on or after January 1, 2014, and who do not have a participation date in any
other state-administered retirement system that is prior to January 1,
2014.
(3) Irrevocable Election.
This subsection shall apply only to members with a participation date in the
Systems between September 1, 2008 and December 31, 2013, who have not received
a retirement benefit from the Systems.
(a)
Pursuant to KRS
61.5955 and
78.545, a member with a
participation date in the Systems between September 1, 2008 and December 31,
2013, may make a one-time, irrevocable election to receive the benefits and
rights provided under the hybrid cash balance plan tier as defined in
KRS
16.583,
61.597,
78.5512, and
78.5516 in lieu of benefits he
or she is currently eligible to receive from the Systems.
1. A member with a participation date based
on service in the Systems or service in another state-administered retirement
system prior to September 1, 2008 shall not be eligible to make this one-time,
irrevocable election upon separation of accounts in accordance with
KRS
61.680,
78.5542, and
105 KAR 1:020.
2. A member with a participation date in the
Systems between September 1, 2008 and December 31, 2013 who also has service in
another state-administered retirement system between September 1, 2008 and
December 31, 2013 shall be eligible to make this one-time, irrevocable election
only upon separation of the member's account in the Systems from the member's
account in the other state-administered retirement system as established in
Section 6(6) of this administrative regulation and in accordance with
KRS
61.680,
78.5542, and
105 KAR
1:020.
(b)
1.
Eligible members who make the one-time, irrevocable election as described in
paragraph (a) of this subsection shall only be entitled to retain purchased
service that is recontribution of a refund, omitted, omitted with interest,
decompression, or service purchased in accordance with the Uniformed Services
Employment and Reemployment Rights Act (USERRA); the agency shall remove any
other purchased service from total months of service credit and refund the cost
of that service back, plus interest, to the source of the purchase.
2. Eligible members who make the one-time,
irrevocable election as described in paragraph (a) of this subsection shall not
retain any active duty military service pursuant to
KRS
61.552(1) and
78.545, unless the eligible
member is currently participating in one (1) of the systems and pays the
military omitted.
(c)
Members eligible to make the one-time, irrevocable election as described in
paragraph (a) of this subsection shall be provided information detailing the
potential results of that election via Member Self Service on the Web site
maintained by the agency, which shall reflect service credit purchases retained
and refunded as described in paragraph (b) of this subsection, and may receive
additional information from the agency's counselors upon request.
(d) The agency shall provide Form 2013,
Hybrid Cash Balance Plan Opt-In Election, on which the member can make a
one-time, irrevocable election as described in paragraph (a) of this
subsection, available to the member via Member Self Service on the Web site
maintained by the agency.
(e) The
agency shall not process an eligible member's one-time, irrevocable election as
described in paragraph (a) of this subsection until a complete and correct Form
2013, Hybrid Cash Balance Plan Opt-In Election, is on file at the retirement
office.
(f) The effective date of
the eligible member's one-time, irrevocable election as described in paragraph
(a) of this subsection shall be the date on which the completed Form 2013,
Hybrid Cash Balance Plan Opt-In Election, is received at the retirement
office.
(4) Prior
Participation that has been refunded. This subsection shall apply to a member
with a participation date with the Systems prior to January 1, 2014, who
terminates employment, and who takes a refund of accumulated contributions
pursuant to KRS
61.625 and
78.545.
(a) If that person is reemployed on or after
January 1, 2014, in a regular full-time position required to participate in one
of the Systems and does not have a participation date with any other
state-administered retirement plan prior to January 1, 2014, the person shall
become a member of the hybrid cash balance plan tier.
(b) If that member purchases his or her
previously refunded service in accordance with
KRS
61.552(3) and
78.545(7), the
purchased service shall only be used to determine the member's years of service
credited and shall not be used to determine the member's participation
date.
Section
4. Construction of Administrative Regulation.
KRS
16.505 to
16.652,
KRS
61.510 to
61.705,
KRS
78.510 to
78.852, and KAR Title 105 shall
apply to the hybrid cash balance plan tier except if required by or as
necessary for the administration of the hybrid cash balance plan tier under
KRS
16.583,
61.597,
78.5512, and
78.5516.
Section 5. Trust Assets. All contributions
made with respect to each Systems' hybrid cash balance plan tier shall be held
in the trust for the respective System. Assets for the hybrid cash balance plan
tier shall not be segregated from the assets for other tiers for the respective
System.
Section 6. Reciprocity.
(1) All service credit with other
state-administered retirement systems, including the Judicial and Legislators'
Plan and the Teachers' Retirement System, shall be used for determining a
member's years of service credited for purposes of eligibility for
annuitization, unless:
(a) The member has
separated the member's account with another state-administered retirement
systems by filing a complete Form 2022, Separation of Accounts; or
(b) The member previously retired based on
the service with the other state-administered retirement system.
(2) Service credit in another
state-administered retirement system shall not be used for determining whether
a member who is not eligible to retire in the hybrid cash balance plan tier has
the five (5) years of service required in order to receive a full refund of his
or her accumulated account balance under
KRS
16.583(5)(b),
61.597(5)(b),
78.5512(5)(b),
and 78.5516(5)(b).
(3) Service credit in the cash balance plan
tier shall be counted as service for the other state-administered retirement
systems and as service for hospital and medical insurance and managed care plan
coverage pursuant to KRS 61.702 and
78.5536.
(4) The same service credit shall not be
counted for benefit calculation purposes for more than one state-administered
retirement system or tier under any circumstances.
(5) A member who is participating in the
hybrid cash balance tier in more than one of the Systems shall have to retire
at the same time and elect the same retirement benefit option in all applicable
Systems, unless the member has requested that his or her accounts be separated
in accordance with
105 KAR 1:020.
(6) A member with a participation date in the
Systems between September 1, 2008 and December 31, 2013 may make a one-time,
irrevocable election to have each system treat his or her service credit in
that system without regard to any other service credit, by filing a Form 2022,
Separation of Accounts, requesting that his or her accounts be separated in
accordance with KRS
61.680 and
78.5542. If so requested, "final
compensation" shall be based on the creditable compensation earned under each
system separately.
(a) Members who are
eligible and seeking to make the one-time, irrevocable election to separate
accounts shall be provided information detailing the potential results of that
election from the agency's counselors.
(b) The agency shall provide Form 2022,
Separation of Accounts, on which the member can make the one-time, irrevocable
election to separate accounts.
(c)
The agency shall not process an eligible member's one-time, irrevocable
election to separate accounts until the member has received the information
required by paragraph (a) of this subsection and a complete and correct Form
2022, Separation of Accounts, is on file at the retirement office.
(d) The effective date of the eligible
member's one-time, irrevocable election to separate accounts shall be the date
on which the completed Form 2022, Separation of Accounts, is received at the
retirement office.
Section
7. Lump-sum Distributions upon Termination of Employment or Death
for Nonvested Members.
(1) Termination of
Employment. A nonvested member eligible for a refund pursuant to
KRS
61.625 and
78.545 shall only be refunded
his or her accumulated contributions, and shall forfeit any accumulated
employer credit.
(2) Death before
Retirement. Upon the death of a nonvested member, the beneficiary designated by
the member pursuant to
KRS
61.542(1)-(2) and 78.545(2)
(or if no designated beneficiary, the member's estate) shall only be entitled
to receive a lump-sum payment of the nonvested member's accumulated
contributions, and shall not be entitled to receive payment of any accumulated
employer credits.
(3) Rollovers. A
nonvested member or the designated beneficiary of a nonvested member who
receives a refund of accumulated contributions may elect to have the refunded
accumulated contributions paid directly to an eligible retirement plan in
accordance with
105 KAR 1:270 and
105 KAR
1:345.
Section 8. Lump-sum Distributions upon
Termination or Distributions upon Death of Vested Members.
(1) Termination of Employment.
(a) Upon termination of employment with all
employers participating in the same Systems in which the member has service
credit, a vested member who is not otherwise eligible to retire may elect to
take a refund of his or her accumulated account balance.
(b)
1. Upon
termination of employment with all employers participating in one or more of
the Systems, a vested member who is eligible for retirement may elect to take a
refund of his or her accumulated account balance, in lieu of other retirement
payment options provided in
KRS
16.583(7),
61.597(7),
78.5512(7), and
78.5516(7).
2. The member's election to take a refund of
his or her accumulated account balance as described in subparagraph 1 of this
paragraph shall be treated as a retirement and the member shall be a retired
member ineligible to participate or accrue additional benefits in the Systems
upon subsequent reemployment with any participating employer pursuant to
KRS
61.637 and
78.5540. Additionally, the
member who has made the election described in subparagraph 1 of this paragraph
shall be subject to all requirements and restrictions for reemploying with a
participating employer in
KRS
61.637,
78.5540 and
105 KAR 1:390.
(2) Death before
Retirement.
(a) Upon the death of a vested
member participating in the Systems, the vested member's designated beneficiary
(or if no designated beneficiary, the member's estate) shall be entitled to a
lump-sum distribution of the vested member's accumulated account balance in
accordance with KRS
61.625(1)(a) and
78.545(5). The
designated beneficiary may also be entitled to the other payment options
available for a death before retirement pursuant to
KRS
16.578,
61.640, and
78.5532.
(b) Upon the death of a vested member who is
not participating in the Systems at the time of death and who has not taken a
refund or retirement benefit, if the vested member has fewer than twelve (12)
years of service credited, the vested member's designated beneficiary (or if no
designated beneficiary the member's estate) shall be entitled to a lump-sum
distribution of the member's accumulated account balance in accordance with
KRS
61.625(1)(a) and
78.545(5). If
the vested member has twelve (12) or more years of service credited, the
designated beneficiary may also be entitled to other payment options available
for a death before retirement pursuant to
KRS
16.578,
61.640, and
78.5532.
(3) Rollover. A vested member or the
designated beneficiary of a vested member who takes a lump-sum distribution of
the vested member's accumulated account balance under this section may elect to
have the lump-sum distribution paid directly to an eligible retirement plan in
accordance with
105 KAR 1:270 and
105 KAR
1:345.
Section 9. Eligibility for an Annuity.
(1) At Normal Retirement Age. Subject to
Section 6 of this administrative regulation, a vested member who reaches normal
retirement age under the applicable System's statutory provisions and who
terminates employment with all participating employers shall be eligible to
retire and may elect to annuitize his or her accumulated account balance or
take a lump-sum distribution of his or her accumulated account balance as
provided in Section 8(1)(b) of this administrative regulation.
(2) Additional Eligibility for Annuitization
for Members with Hazardous position Service. A member who has hazardous
position service as provided in
KRS
16.505-16.652,
61.592 and
78.5520, who has 25 or more
years of service credited under
KRS
16.543(1),
61.543(1), or
78.615(1) or
any other Kentucky state-administered system, and who terminates employment
with all employers participating in the Systems shall be eligible to retire and
may elect to annuitize his or her accumulated account balance or take a
lump-sum distribution of his or her accumulated account balance as provided in
Section 8(1)(b) of this administrative regulation.
(3) Additional Eligibility for Annuitization
for Members with Service Only in a Nonhazardous Position. A member with
exclusively nonhazardous position service who is at least age fifty-seven (57),
who has an age plus years of service total of at least eighty-seven (87) years,
and who terminates employment with all employers participating in the Systems
shall be eligible to retire and may elect to annuitize his or her accumulated
account balance or take a lump-sum distribution of his or her accumulated
account balance as provided in Section 8(1)(b) of this administrative
regulation.
(4) Annuitization. A
member who elects to annuitize his or her accumulated account balance may
receive a retirement benefit determined in accordance with actuarial
assumptions and actuarial methods adopted under subsection (6) of this section
and in effect on the member's retirement date.
(5) Return of Contributions. If the
retirement benefit payment option selected by the vested member includes a
guaranteed return of contributions, that retirement benefit payment option
shall be interpreted to mean that guarantee applies to the accumulated account
balance.
(6) Board Action with
respect to Annuitization. The Board of Trustees of the Kentucky Retirement
Systems and the Board of Trustees of the County Employees Retirement System
shall adopt actuarial assumptions and methods that will apply to a specific
fiscal year prior to the start of that fiscal year.
(7) Eligibility for Retiree Hospital and
Medical Benefit. Only a member who is receiving a monthly annuitized benefit
shall be eligible for hospital and medical insurance and managed care plan
coverage. A member who takes a lump-sum refund or lump-sum retirement benefit
shall not be eligible for hospital and medical insurance and managed care plan
coverage.
Section 10.
Disability retirement. A member participating in the hybrid cash balance plan
tier in one or more of the Systems whose disability retirement allowance is
discontinued pursuant to
KRS
61.615 and
78.5528 shall begin receiving
retirement benefits, if eligible, under
KRS
16.583(6),
61.597(6),
78.5512(6), or
78.5516(6), but
shall not be eligible for early retirement benefits under
KRS
61.559,
78.5510,
78.5514, or
16.577.
Section 11. Purchase of Service Credit.
(1) Members participating in the hybrid cash
balance plan tier shall only be eligible to purchase service credit that is
recontribution of a refund, omitted, omitted with interest, military omitted,
decompression, or under the Uniformed Services Employment and Reemployment
Rights Act (USERRA), and shall not be eligible to make any other types of
service purchases.
(2) Uniformed
Services Employment and Reemployment Rights Act (USERRA) Service.
(a) Years of service credited shall be
determined as required by USERRA.
(b) In order to receive service credit for
military omitted, decompression, or under the Uniformed Services Employment and
Reemployment Rights Act (USERRA), the member shall pay the member contributions
in accordance with KRS 16.543,
61.543, and
78.615, as though the member was
employed during the period of his or her active military duty or
decompression.
(c) The employer
shall pay all employer contributions owed in accordance with
KRS
61.552,
61.565,
78.545, and
78.635.
(3) Repayment of Refunded Contributions Plus
Interest Credits or Accumulated Account Balance.
(a) Upon reemployment with a participating
employer in a regular full-time position required to participate in the Systems
or participation in another state-administered retirement system, a nonvested
member who took a refund of his or her member contributions plus interest
credits may regain the refunded service credit by repaying, with interest at a
rate determined by the board of the respective retirement system, the amount
refunded with post-tax employee contributions or a rollover or transfer allowed
under the Internal Revenue Code. Although the repayments of refunded
contributions plus interest credit shall be used to determine the member's
service credited, the repayment of the amount refunded shall not be used to
determine a member's participation date.
(b) Upon reemployment with a participating
employer in a regular full-time position required to participate in the Systems
or participation in another state-administered retirement system, a vested
member who was not eligible to retire and who took a refund of his or her
accumulated account balance may regain the refunded service credit by repaying,
with interest at a rate determined by the board of the respective retirement
system, the amount refunded with post-tax employee contributions or a rollover
or transfer allowed under the Internal Revenue Code. Although the repayments of
the refunded accumulated account balance shall be used to determine the
member's service credited, the repayment of the amount refunded shall not be
used to determine a member's participation date.
(4) Omitted Service. Any person who is
entitled to service credit in the hybrid cash balance plan tier that was not
reported in accordance with
KRS
16.543,
61.543, or
78.615 may pay the amount of
member contributions that would have been due on that service in order to
receive credit for the service in the hybrid cash balance plan tier. However,
the service shall not be credited to the member's account until employer
contributions for the service are received by the Systems. Once member and
employer contributions have been received, accumulated employer credits shall
be reflected in the member's account.
Section 12. Incorporation by Reference.
(1) The following material is incorporated by
reference:
(a) Form 2013, "Hybrid Cash Balance
Plan Opt-In Election", February 2021; and
(b) Form 2022, "Separation of Accounts",
September 2022.
(2) This
material may be inspected, copied, or obtained, subject to applicable copyright
law, at the Kentucky Public Pensions Authority, 1260 Louisville Road,
Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m. This
material is also available on the Kentucky Public Pensions Authority's Web site
at kyret.ky.gov.
STATUTORY AUTHORITY:
KRS
61.505(1)(g)