Current through Register Vol. 50, No. 6, December 1, 2023
RELATES TO:
KRS
61.645(9)(e), 26 C.F.R.
1.401(a)(9)-1-1.401(a)(9)-9,
26 U.S.C.
401(a)(9)
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
61.645(9)(g) requires the
Board of Trustees of Kentucky Retirement Systems to promulgate administrative
regulations necessary to carry out the provisions of
KRS
61.515 to
61.705,
16.510
to
16.652,
and
78.520
to
78.852.
KRS
61.645(9)(e) and this
administrative regulation implement the statutory requirements of IRC Section
401(a)(9), which is codified as
26 U.S.C.
401(a)(9), and are meant to
be a reasonable good faith interpretation of those statutory requirements. This
administrative regulation establishes minimum distribution requirements in
compliance with
26 U.S.C.
401(a)(9).
Section 1. Definitions.
(1) "Member" means a member of a retirement
fund established in accordance with
KRS
61.515 to
61.705,
16.510
to
16.652,
and
78.520
to
78.852,
and administered by the Kentucky Retirement Systems.
(2) "Required beginning date" means April 1
of the calendar year following the later of:
(a) The calendar year in which the member
attains age seventy and one-half (70 1/2); or
(b) The calendar year in which the member
retires.
Section
2.
(1) This administrative
regulation shall apply to members of a fund established in accordance with
KRS
61.515 to
61.705,
16.510
to
16.652,
and
78.520
to
78.852.
(2) Kentucky Retirement Systems shall pay all
benefits in accordance with a good faith interpretation of the requirements of
26 U.S.C.
401(a)(9) and the Code of
Federal Regulations in effect under that section, as applicable to a
governmental plan within the meaning of
26 U.S.C.
414(d). The requirements of
26 U.S.C.
401(a)(9) shall take
precedence over any inconsistent provisions of
KRS
61.515 to
61.705,
16.510
to
16.652,
and
78.520
to
78.852.
(3) The member's entire interest shall be
distributed over the member's life or lives of the member and a designated
beneficiary, or over a period not extending beyond the life expectancy of the
member or of the member and a designated beneficiary.
Section 3.
(1) Except as provided in subsection (2) of
this section, the member's entire interest shall be distributed, or begin to be
distributed, to the member no later than the member's required beginning
date.
(2) If the member dies before
distributions begin, the member's entire interest shall be distributed, or
begin to be distributed, no later than as follows:
(a) Except as provided in subsection (3) of
this section, if the member's surviving spouse is the member's sole designated
beneficiary, distributions to the surviving spouse shall begin by the later of:
1. December 31 of the calendar year
immediately following the calendar year in which the member died; or
2. December 31 of the calendar year in which
the member would have attained age seventy and one-half (70 1/2);
(b) If the member's surviving
spouse is not the member's sole designated beneficiary, distributions to each
designated beneficiary shall begin by December 31 of the calendar year
immediately following the calendar year in which the member died; or
(c) If there is no designated beneficiary as
of September 30 of the year following the year of the member's death, the
member's entire interest shall be distributed by December 31 of the calendar
year containing the fifth anniversary of the member's death.
(3) If a member dies after the
required distribution of benefits has begun, the remaining portion of the
member's interest shall be distributed at least as rapidly as under the method
of distribution before the member's death.
(4)
(a) For
purposes of Section 3(2) to (3) and Section 6 of this administrative
regulation, distributions shall be required to begin on the member's required
beginning date.
(b) If annuity
payments irrevocably commence to the member before the member's required
beginning date, or to the member's surviving spouse before the date
distributions are required to begin to the surviving spouse pursuant to
subsection (2)(a) of this section, the date distributions are considered to
begin shall be the date distributions actually commence.
Section 4.
(1) If the member's interest is paid in the
form of annuity distributions, payments pursuant to the annuity shall satisfy
the following requirements:
(a) The annuity
distributions shall be paid in monthly periodic payments;
(b) The distribution period shall be over a
life (or lives) or over a period certain not longer than the period described
in this section or Section 5 or 6 of this administrative regulation;
(c) Once payments have begun over a period
certain, the period certain shall not be changed even if the period certain is
shorter than the maximum permitted; and
(d) Payments shall increase only as follows:
1. By the annual percentage increase provided
for pursuant to
KRS
61.515 to
61.705,
16.510
to
16.652,
and
78.520
to
78.852;
2. To the extent of the reduction in the
amount of the member's payments to provide for a survivor benefit upon death,
but only if the beneficiary whose life was being used to determine the
distribution period described in this section dies, or if the beneficiary is
the member's spouse and they divorce, as provided in
KRS
61.635(10);
3. To provide cash refunds of employee
contributions upon the member's death; or
4. To pay any increased benefits that result
from a plan amendment.
(2)
(a) The
amount that shall be distributed on or before the member's required beginning
date, or if the member dies before distributions begin, the date distributions
are required to begin pursuant to Section 3(2) of this administrative
regulation, shall be the payment that is required for one (1) month.
(b) The second payment shall not be required
to be made until the end of the next payment interval even if that payment
interval ends in the next calendar year.
(c) All of the member's benefit accruals as
of the last day of the first distribution calendar year shall be included in
the calculation of the amount of the annuity payments for months ending on or
after the member's required beginning date.
Section 5.
(1) The amount of annuity paid to a member's
beneficiary shall not exceed the maximum determined under the incidental death
benefit requirement of
26 U.S.C.
401(a)(9)(G), and the
minimum distribution incidental benefit rule under 26 C.F.R. 1.401(a)(9)-6,
Q&A-2.
(2) The death and
disability benefits provided by Kentucky Retirement systems shall be limited by
the incidental benefit rule set forth in
26 U.S.C.
401(a)(9)(g) and
1.401-1(b)(1)(i) or any successor law. As a result, the total death or
disability benefits payable shall not exceed twenty-five (25) percent of the
cost of all of the members' benefits received from Kentucky Retirement
Systems.
(3)
(a) Unless the member's spouse is the sole
designated beneficiary and the form of distribution is a period certain and no
life annuity, the period certain for an annuity distribution commencing during
the member's lifetime shall not exceed the applicable distribution period for
the member pursuant to the uniform lifetime table established in 26 C.F.R.
1.401(a)(9)-9 for the calendar year that contains the annuity starting
date.
(b) If the annuity starting
date precedes the year in which the member reaches age seventy (70), the
applicable distribution period for the member shall be the distribution period
for age seventy (70) under the uniform lifetime table established in 26 C.F.R.
1.401(a)(9)-9 plus the excess of seventy (70) over the age of the member as of
the member's birthday in the year that contains the annuity starting
date.
(4) If the
member's spouse is the member's sole designated beneficiary and the form of
distribution is a period certain and no life annuity, the period certain shall
not exceed the longer of the member's applicable distribution period, as
determined pursuant to this subsection, or the joint life and last survivor
expectancy of the member and the member's spouse as determined pursuant to the
joint and last survivor table established in 26 C.F.R. 1.401(a)(9)-9, using the
member's and spouse's attained ages as of the member's and spouse's birthdays
in the calendar year that contains the annuity starting
date.
Section 6.
(1) If the member dies before the date
distribution of the member's interest begins and there is a designated
beneficiary, the entire interest payable to the member shall be distributed,
beginning no later than the time established in Section 3(2)(a) or (b) of this
administrative regulation, over the life of the designated beneficiary or over
a period certain not exceeding:
(a) Unless
the annuity starting date is before the first distribution calendar year, the
life expectancy of the designated beneficiary determined using the
beneficiary's age as of the beneficiary's birthday in the calendar year
immediately following the calendar year of the member's death; or
(b) If the annuity starting date is before
the first distribution calendar year, the life expectancy of the designated
beneficiary determined using the beneficiary's age as of the beneficiary's
birthday in the calendar year that contains the annuity starting
date.
(2) If the member
dies before the date distribution of his or her interest begins, the member's
surviving spouse is the member's sole designated beneficiary, and the surviving
spouse dies before distributions to the surviving spouse begin, this section
shall apply as if the surviving spouse were the member, except that the time by
which distributions are required to begin shall be determined without regard to
Section 3(2)(a) of this administrative
regulation.
30 Ky.R. 1137;
1457; eff. 1-5-2004; 34 Ky.R. 124; 547; eff. 10-5-2007; 35 Ky.R. 973; 1722;
eff. 2-6-2009; TAm eff. 3-5-2019; Crt eff.
3-5-2019.
STATUTORY AUTHORITY:
KRS
61.645(9)(e)