Current through Reg. 49, No. 38; September 20, 2024
(a) General Rules and Definitions.
(1) Intent. This rule is intended to comply
with a reasonable good faith interpretation of the requirements of
26 U.S.C.
§401(a)(9).
(2) Plan Qualification and §401(a)(9)
compliance. Pursuant to Tex. Gov't Code §
825.506(a) and
(c), this section modifies the TRS retirement
plan to the extent necessary for the plan to be a qualified plan and comply
with
26 U.S.C.
§401(a)(9) and prevails
over any inconsistent provision of the plan.
(3) Requirements of Treasury Regulations
Incorporated. All distributions required under this section will be determined
in accordance with 26 C.F.R.
§§1.401(a)(9)-1
through 1.401(a)(9)-9 of
the Internal Revenue Service, U.S. Department of Treasury
regulations.
(4) Definition of
Participant. In this section, a TRS member or TRS retiree.
(5) Definition of Designated Beneficiary. The
individual who is designated as the beneficiary under applicable plan
provisions and who is the designated beneficiary under
26 U.S.C.
§401(a)(9) and §1.401(a)(9)-1,
Q&A-4, of the Treasury regulations.
(6) Definition of Distribution Calendar Year.
A calendar year for which a minimum distribution is required. For distributions
beginning before a participant's death, the first distribution calendar year is
the calendar year immediately preceding the calendar year that contains the
participant's required beginning date. For distributions beginning after a
participant's death, the first distribution calendar year is the calendar year
in which distributions are required to begin pursuant to subsection (b)(2) of
this section.
(7) Definition of
Life Expectancy. For purposes of this rule, life expectancy means life
expectancy as computed by use of the Single Life Table in §1.401(a)(9)-9
of the Treasury regulations.
(8)
Definition of Required Beginning Date. The date specified in subsection (b)(1)
of this section.
(b)
Time and Manner of Distribution.
(1) Required
Beginning Date.
(A) Required beginning date
means April 1 of the calendar year following the later of -
(i) the calendar year in which the
participant attains age 70 1/2, or
(ii) the calendar year in which the
participant terminates employment with a TRS-covered employer.
(B) A participant is required to
take distribution of the participant's entire interest, or to begin to take a
distribution of the entire interest, no later than the participant's required
beginning date.
(2)
Death of Participant Before Distributions Begin. If a member dies before
distributions begin, the member's entire interest is required to be
distributed, or begin to be distributed, no later than described in
subparagraphs (A) - (D) of this paragraph. For purposes of this paragraph and
subsection (e) of this section, distributions are considered to begin on the
member's required beginning date (or, if subparagraph (D) of this paragraph
applies, the date distributions are required to begin to the surviving spouse
under subparagraph (A) of this paragraph). 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 under subparagraph (A) of this paragraph), the date
distributions are considered to begin is the date distributions actually
commence.
(A) If the member's surviving
spouse is the member's sole designated beneficiary, then distributions to the
surviving spouse are required to begin by December 31 of the calendar year
immediately following the calendar year in which the member died, or by
December 31 of the calendar year in which the member would have attained age 70
1/2, if later.
(B) If the member's
surviving spouse is not the member's sole designated beneficiary, then
distributions to the designated beneficiary are required to begin by December
31 of the calendar year immediately following the calendar year in which the
member died.
(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 is required to be distributed by
December 31 of the calendar year containing the fifth anniversary of the
member's death.
(D) If the member's
surviving spouse is the member's sole designated beneficiary and the surviving
spouse dies after the member but before distributions to the surviving spouse
begin, this paragraph, other than subparagraph (A) of this paragraph, will
apply as if the surviving spouse were the member.
(3) Form of Distribution. As of the first
distribution calendar year, distributions are required be made in accordance
with subsections (c), (d), (e), (f), and (g) of this section.
(c) Determination of Amount to be
Distributed Each Year.
(1) General Annuity
Requirements. If the participant's interest is paid in the form of annuity
distributions to the participant after retirement or to the participant's
beneficiary before or after retirement of the participant, payments under the
annuity will satisfy the following requirements:
(A) the annuity distributions will be paid in
periodic payments made at monthly intervals;
(B) the distribution period will be over a
life (or lives) or over a period certain not longer than the period described
in the Treasury regulations;
(C)
once payments have begun over a period certain, the period certain will not be
changed even if the period certain is shorter than the maximum permitted;
and
(D) payments will either be
non-increasing or will increase only as permitted in the Treasury
regulations.
(2) Amount
Required to be Distributed by Required Beginning Date.
(A) The amount that is required to 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 to a beneficiary under subparagraph (A) or (B) of subsection (b)(2) of
this section) is the payment that is required for one month. The second payment
need not be made until the end of the next payment interval even if that
payment interval ends in the next calendar year. All of the member's benefit
accruals as of the last day of the first distribution calendar year will be
included in the calculation of the amount of the annuity payments for months
ending on or after the member's required beginning date. For a retiree
receiving a distribution of a partial lump sum option (PLSO) payment or a
deferred retirement option plan (DROP) payment in conjunction with a monthly
annuity payment due for a month beginning on or before the member's required
beginning date, the minimum distribution requirement of this section is
satisfied by the annuity payment required to be made for that month.
(B) In the case of a refund to a member of
the member's entire accumulated contributions, the amount that is the required
minimum distribution for the distribution calendar year (and thus is not
eligible for rollover under
26 U.S.C.
§402(c)) is determined
by treating the single sum distribution as a distribution from an individual
account plan and treating the amount of the single sum distribution as the
member's account balance as of the end of the relevant valuation calendar year.
The minimum amount required to be distributed for each distribution calendar
year is equal to the quotient obtained by dividing the account by the
applicable distribution period using the Uniform Lifetime Table in A-2 of
Treasury regulation §1.401(a)(9)-9. If the refund is being made in the
calendar year containing the required beginning date and the required minimum
distribution for the member's first distribution calendar year has not been
distributed, the portion of the single sum distribution that represents the
required minimum distribution for the member's first and second distribution
calendar year is not eligible for rollover.
(d) Requirements For Distributions of
Retirement Annuity Payments to Retiree or Beneficiary
(1) Option 1 or 5 Retirement Payment Plan
With Non-spousal Beneficiary. If the participant's interest is to be
distributed in the form of an Option 1 or 5 annuity and the participant
designated a nonspouse beneficiary, annuity payments to the designated
beneficiary after the retiree's death must not at any time exceed the
applicable percentage of the annuity payment for such period that would have
been payable to the retiree using the table set forth in Q&A-2 of
§1.401(a)(9)-6 of the Treasury regulations. An Option 1 or 5 payment plan
that would result in a payment to a designated nonspouse beneficiary above the
applicable percentage shall not be available to the participant.
(2) Option 3 and 4 Retirement Payment Plans.
(A) If the participant's spouse is not the
sole designated beneficiary, the participant may not select an Option 3 or 4
retirement payment plan if the period certain for an annuity distribution
commencing during the retiree's lifetime would exceed the applicable
distribution period for the retiree under the Uniform Lifetime Table set forth
in §1.401(a)(9)-9 of the Treasury regulations for the calendar year that
contains the annuity starting date. If the annuity starting date precedes the
year in which the retiree reaches age 70, the applicable distribution period
for the retiree is the distribution period for age 70 under the Uniform
Lifetime Table set forth in §1.401(a)(9)-9 of the Treasury regulations
plus the excess of 70 over the age of the retiree as of the retiree's birthday
in the year that contains the annuity starting date.
(B) If the participant's spouse is the sole
designated beneficiary, the participant may not select an Option 3 or 4
retirement payment plan if the period certain would exceed the longer of the
retiree's applicable distribution period, as determined under this paragraph,
or the joint life and last survivor expectancy of the participant and the
participant's spouse as determined under the Joint and Last Survivor Table set
forth in §1.401(a)(9)-9 of the Treasury regulations, using the
participant's and spouse's attained ages as of the participant's and spouse's
birthdays in the calendar year that contains the annuity starting
date.
(e)
Requirements for Minimum Distributions Where Member Dies Before Date
Distributions Begin.
(1) Participant Survived
by Designated Beneficiary. If the member dies before the date that distribution
of his or her interest begins (as described in subsection (b)(2) of this
section) and there is a designated beneficiary, the entire interest payable
with respect to the member is required to be distributed, beginning no later
than the time described in subparagraph (A) or (B) of subsection (b)(2) of this
section, 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) No Designated
Beneficiary. If the member dies before the date distributions begin and there
is no designated beneficiary as of September 30 of the year following the year
of the member's death, distribution of the member's entire interest is required
to be completed by December 31 of the calendar year containing the fifth
anniversary of the member's death.
(3) Death of Surviving Spouse Before
Distributions to Surviving Spouse Begin. 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 subsection will apply as if
the surviving spouse were the member, except that the time by which
distributions must begin will be determined without regard to subsection
(b)(2)(A) of this section.
(f) Election To Apply 5-Year Rule to
Distributions to Designated Beneficiaries. Notwithstanding subsection (e) of
this section, if the member dies before distributions begin and there is a
designated beneficiary entitled to a lump sum distribution, distribution of the
lump sum to the designated beneficiary is not required to begin by the date
specified in subsection (e)(1) of this section, if the member's entire interest
is distributed to the designated beneficiary by December 31 of the calendar
year containing the fifth anniversary of the member's death. If the member's
surviving spouse is the member's sole designated beneficiary and the surviving
spouse dies after the member but before distributions to either the member or
the surviving spouse begin, this provision will apply as if the surviving
spouse were the member.
(g)
Requirements for Minimum Distributions Where Participant Dies After
Distributions Begin. If a participant dies after retirement benefits have
commenced, benefits must continue to be distributed to the beneficiary at least
as rapidly as provided for under the option elected by the participant pursuant
to §
29.8 of
this title (relating to Retirement Payment Plans).
(h) An eligible member who has applied for
service or disability retirement and who dies on or after the retirement date
will be considered to have retired and commenced distributions.
(i) A participant or beneficiary is required
to initiate and complete appropriate TRS processes to take distributions in
accordance with this section. A participant or beneficiary who fails to take
distributions in accordance with this section is subject to federal tax law
establishing an additional tax on minimum distributions that are required but
not taken.
(j) Grandfather
Provisions. Notwithstanding any provision of this section to the contrary, with
respect to any annuity option or other plan provision as in effect on April 17,
2002, TRS will apply a reasonable and good faith interpretation of the
requirement of Internal Revenue Code §401(a)(9). TRS is exercising the
authority granted to governmental plans in the Pension Protection Act of 2006
in establishing this section as its good faith interpretation of the
requirements of Internal Revenue Code §401(a)(9). The provisions of this
section, including subsections (d) and (e) of this section, affecting payment
options otherwise available under the TRS plan are applicable to retirements
with an effective date after December 31, 2007, or to a benefit payable as a
result of the death of a participant after December 31, 2007.
