Chapter 3307:1-12 Distributions

3307:1-12-01 Distributions.

(A) Notwithstanding any provision in Chapter 3307. of the Revised Code or in the rules governing the state teachers retirement system to the contrary, distributions to members and beneficiaries shall be made in accordance with section 401(a)(9) of the Internal Revenue Code and applicable regulations thereunder and with the following rules.

(1) The entire interest of a member shall be distributed to such member:

(a) Not later than the required beginning date; or

(b) Beginning not later than the required beginning date, in accordance with applicable regulations, over the life of such member or the lives of such member and a designated beneficiary (or over a period not extending beyond the life expectancy of such member) within the meaning of section 401(a)(9) of the Internal Revenue Code.

(2) The required beginning date means April first of the calendar year following the later of:

(a) The calendar year in which the member attains age seventy and one half; or

(b) The calendar year in which the member retires.

(3) If distribution of a member's benefit has begun pursuant to the provisions of section 401(a)(9) of the Internal Revenue Code and the applicable regulations and the member dies, any survivor benefits will be distributed at least as rapidly as under the plan of payment selected and effective as of the date of the member's death.

(4) If a member dies before the distribution of the member's interest has begun pursuant to the provisions of section 401(a)(9) of the Internal Revenue Code and the applicable regulations, the entire interest of the member will be distributed by the end of the calendar year which contains the fifth anniversary of the date of such member's death. However, if a benefit is payable to or for the benefit of a designated beneficiary within the meaning of section 401(a)(9) of the Internal Revenue Code, the benefit may be distributed, in accordance with applicable regulations, over the life of such beneficiary, provided that such distributions begin not later than the end of the calendar year immediately following the calendar year in which the member died. If the beneficiary is the surviving spouse of the member, distributions shall begin, pursuant to this section, not later than the end of the calendar year in which the member would have attained age seventy and one half; provided, however, that if the surviving spouse dies before such distributions begin, the provisions set forth in this section shall be applied as if the surviving spouse were the member.

(5) Any death benefit amounts payable under Chapter 3307. of the Revised Code must comply with the incidental death benefit requirements of section 401(a)(9)(G) of the Internal Revenue Code and regulations thereunder.

(6) Any amount paid to a qualified child as defined in section 3307.66 of the Revised Code shall be treated as if it had been paid to the surviving spouse if the amount becomes payable to the surviving spouse upon such child ceasing to be a qualified survivor.

(B) No payment in an amount of two hundred dollars or more shall be made to any person until any applicable requirements of sections 401(a)(31), 402(c), 402(f), 408A, and 3405 of the Internal Revenue Code or any provision of federal law governing withholding from or rollover of distributions from a qualified trust have been satisfied, provided that:

(1) The state teachers retirement system shall give notice of options available to any such person as required by federal law.

(2) The state teachers retirement system will permit any such person, except a trust or an estate, to direct that an amount at least equal to the entire payment due from the state teachers retirement system or five hundred dollars, whichever is less, be paid as a direct rollover to one eligible retirement plan or Roth IRA designated by the person. Effective September 21, 2007, a nonspouse beneficiary of a deceased member may only rollover directly to an individual retirement plan that shall be treated as an inherited individual retirement account or annuity to the extent permitted by section 402(c)(11) of the Internal Revenue Code.

(3) Application by the person to have all or part of a payment paid as a direct rollover shall be on a form provided by the state teachers retirement system which shall contain the name and address of the retirement plan or Roth IRA to which the payment or portion thereof is to be made. The form provided by the system shall further contain the person's representation and certification that, if the person is rolling an amount over to a retirement plan, such retirement plan is an eligible retirement plan.

(4) Any part of a payment that is a required minimum distribution, as that term is defined in section 401(a)(9) of the Internal Revenue Code and the applicable regulations thereunder, is ineligible to be paid as a direct rollover.

(C) When a member applies for the restoration of service credit under section 3307.71 of the Revised Code or the purchase of service credit under section 3307.72 , 3307.73 , 3307.74 , 3307.741 , 3307.751 , 3307.752 , 3307.76 , 3307.761 , 3307.763 , division ( D) of section 3307.77 , 3307.771 or 3307.78 of the Revised Code, to the extent permitted by federal law, the member may also apply to have the state teachers retirement system accept, in full or partial payment of the cost of such restoration or purchase, pretax funds transferred to the state teachers retirement system as a direct rollover on and after July 2, 2002 from a plan or account eligible under the terms of the Internal Revenue Code to roll funds over to a trust qualified under the terms of section 401(a) of the Internal Revenue Code provided the funds were not commingled in the individual retirement plan with funds from any source other than a trust qualified under section 401(a) of the Internal Revenue Code. Acceptance of a direct rollover under this paragraph shall be subject to the following:

(1) Application shall be on a form approved by the state teachers retirement system;

(2) Application shall be subject to determination by the state teachers retirement system of the amount that will be accepted;

(3) The amount accepted by the state teachers retirement system shall in no case exceed the cost of restoration or purchase determined by the system.

(D) For purposes of section 3307.563 of the Revised Code, interest rates on amounts to be paid under section 3307.56 or 3307.562 of the Revised Code shall be determined by the board not to exceed four per cent, compounded annually, for members with less than three full years of qualifying service credit and not to exceed six per cent, compounded annually, for members with three or more full years of qualifying service credit. Interest for all years withdrawn shall begin to accrue in the fiscal year following deposit. No interest will be payable if a former member applies to withdraw an account consisting only of contributions made during the current fiscal year. Interest stops accruing as of the end of the month immediately preceding withdrawal.

(E) For purposes of division (A)(3)(b) of section 3307.563 of the Revised Code, contributions restored under section 3307.712 of the Revised Code shall be considered the same as contributions restored under section 3307.71 of the Revised Code to the extent that the amount paid to restore the credit included amounts received by the member under division (A)(3)(b) of section 3307.563 of the Revised Code.

(F) Pursuant to division (A)(2) of section 3307.56 of the Revised Code, consent of a spouse shall not be required for withdrawal:

(1) If the retirement system receives the written statement of a physician certifying that the spouse is medically incapable of acknowledging the request for withdrawal by the applicant, and receives consent by and through a duly appointed guardian, as specified by rule 3307-7-01 of the Administrative Code or

(2) If the affidavits of the applicant and at least two other persons, one of whom must be unrelated to the applicant, are received attesting that the whereabouts of the spouse are unknown.

(G) If a superannuate fails to elect a benefit as provided in section 3307.352 of the Revised Code by the February first in the calendar year immediately following the later of the calendar year of the superannuate's attainment of age seventy and one half or the calendar year of retirement, the state teachers retirement board shall make a lump sum distribution to the superannuate no later than the required beginning date for the superannuate.

Effective: 03/24/2013
R.C. 119.032 review dates: 03/22/2016
Promulgated Under: 111.15
Statutory Authority: 3307.04
Rule Amplifies: 3307.56 , 3307.563 , 3307.71 , 3307.712 , 3307.72 , 3307.73 , 3307.74 , 3307.741 , 3307.751 , 3307.752 , 3307.76 , 3307.761 , 3307.77 , 3307.771 , 3307.78
Prior Effective Dates: 1/1/93, 3/18/93, 7/1/01 (Emer.), 9/17/01, 7/1/02 (Emer.), 9/17/02, 1/1/06 (Emer.), 4/1/06, 9/21/07 (Emer.), 12/20/07, 1/22/09 (Emer.), 4/29/09 (Emer), 7/16/09, 1/7/13 (Emer)

3307:1-12-02 Maximum permissible benefits.

Applicability of the final 415 regulations effective beginning on the limitation year commencing on January 1, 2008.

(A) In general. The final regulations for section 415 of the Internal Revenue Code are accelerated and applicable to distributions to members and beneficiaries as of January 1, 2008. Effective January 1, 2008 and pursuant to section 3307.58 of the Revised Code and section 415 of the Internal Revenue Code, the maximum annual benefit distributed to a member or beneficiary shall be determined as of the date the benefit commences and shall be limited to the maximum amounts permitted under section 415(b)(1)(A) of the Internal Revenue Code. In general, section 415 limits a member's maximum annual benefit to one hundred eighty-five thousand dollars (one hundred ninety-five thousand dollars for 2009, which amount shall be increased to reflect cost of living increases pursuant to Internal Revenue Code section 415) payable in a straight life annuity but if the member has not completed ten years of participation, such maximum annual dollar limitation is reduced by the ratio which the number of his years of participation bears to ten. The maximum dollar limitation applies to a benefit payable at age sixty-two and shall be adjusted in accordance with cost of living increases in the amount determined by the commissioner of Internal Revenue. The limits of this paragraph do not apply to benefits attributable to rollover contributions made pursuant to paragraph (N) of rule 3307:1-3-11 of the Administrative Code and the annual benefit attributable to any such rollover contributions shall be determined in accordance with section 1.415(b) -1(b)(2)(v) of the Treasury Regulation.

(B) No adjustment shall be made for any benefit payment which is to commence after age sixty-two.

(C) For any benefits paid prior to age sixty-two, the maximum dollar limit shall be reduced as follows:

(1) For annuity starting dates on or before December 31, 2007. The maximum annual benefit shall be reduced to an annual straight-life annuity beginning at the annuity starting date that is the actuarial equivalent of the maximum annual benefit (adjusted for members with fewer than ten years of participation, if necessary), using whichever of the following produces a smaller annual amount: (a) an interest rate and mortality table determined and adjusted periodically by the state teachers retirement board, or (b) a five per cent interest rate assumption and the modified unisex version of the mortality tables for the plan year in which the annuity begins as prescribed by the secretary of the treasury for use in determining present value under subparagraphs (A) and (B) of section 417(e)(3) of the Internal Revenue Code. Such mortality tables shall be based on the actual experience of pension plans and projected trends in such experience as specified in subparagraph (A) of section 430(h)(3) of the Internal Revenue Code without regard to subparagraphs (C) and (D) of that section.

(2) For annuity starting dates after December 31, 2007. The maximum annual benefit shall be reduced to the lesser of:

(a) An annual straight-life annuity beginning at the annuity starting date that is the actuarial equivalent of the maximum annual benefit (adjusted for members with fewer than ten years of participation, if necessary), using for this purpose a five per cent interest rate assumption and the modified unisex version of the mortality tables for the plan year in which the annuity begins as prescribed by the secretary of the treasury for use in determining present value under subparagraphs (A) and (B) of section 417(e)(3) of the Internal Revenue Code. Such mortality tables shall be based on the actual experience of pension plans and projected trends in such experience as specified in subparagraph (A) of section 430(h)(3) of the Internal Revenue Code without regard to subparagraphs (C) and (D) of that section; or

(b) The maximum annual benefit (adjusted for members with fewer than ten years of participation, if necessary), multiplied by the ratio of the annual amount of the immediately commencing straight life annuity at the annuity starting date to the annual amount of the immediately commencing straight life annuity at age sixty-two.

(3) The member's age for the purposes of calculating the benefits to be paid prior to age sixty-two shall be expressed as the age of the member, in completed calendar year months, as of the annuity starting date.

(D) No actuarial adjustment to the maximum annual benefit shall be made for the following:

(1) Survivor benefits payable to a spouse under a qualified joint and survivor annuity pursuant to section 3307.60 of the Revised Code, to the extent such benefits would not be payable if the member's benefit were paid in another form;

(2) Any benefits provided to members that are not directly related to retirement benefits, including qualified disability benefits or allowances set forth in sections 3307.63 and 3307.631 of the Revised Code and health benefits set forth in section 3307.39 of the Revised Code; or

(3) The inclusion of automatic periodic increases to benefits calculated in the manner set forth in section 3307.67 of the Revised Code, provided that the form of benefit is not subject to section 417(e)(3) of the Internal Revenue Code (which applies based on the form of benefit and not the status of the plan described in sections 3307.50 to 3307.79 of the Revised Code), would otherwise satisfy this rule, and complies with the determination of benefit increases as calculated in paragraph (B) of rule 3307:1-10-01 of the Administrative Code.

(E) If an adjustment is required because the member selects a form of payment under section 3307.60 of the Revised Code to which section 415(b)(2)(E) of the Internal Revenue Code applies based on the form of benefit and not the status of the plan described in sections 3307.50 to 3307.79 of the Revised Code and that is not subject to section 417(e)(3) of the Internal Revenue Code, the value of the equivalent straight-life annuity for testing purposes of section 415(b) is the greater of (i) the annual amount of the straight-life annuity (if any) payable to the member commencing at the same annuity starting date as the form of benefit payable to the member and (ii) the annual amount of the straight-life annuity commencing at the same annuity starting date that has the same actuarial present value as the form of benefit payable to the member, computed using a five per cent interest assumption and the modified unisex version of the mortality tables for the plan year in which the annuity begins as prescribed by the secretary of the treasury for use in determining present value under subparagraphs (A) and (B) of section 417(e)(3) of the Internal Revenue Code. Such mortality tables shall be based on the actual experience of pension plans and projected trends in such experience as specified in subparagraph (A) of section 430(h)(3) of the Internal Revenue Code without regard to subparagraphs (C) and (D) of that section.

(F) If an adjustment is required because the member selects a form of payment under section 3307.60 of the Revised Code to which sections 415(b)(2)(E) and 417(e)(3) of the Internal Revenue Code apply based on the form of benefit and not the status of the plan described in sections 3307.50 to 3307.79 of the Revised Code, the actuarial straight-life annuity for testing under 415(b) for annuity starting dates on and after January 1, 2008 is determined by calculating the greatest annual straight-life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using (i) an interest rate and mortality table determined and adjusted periodically by the state teachers retirement board, (ii) a 5.5 per cent interest rate assumption and the modified unisex version of the mortality tables for the plan year in which the annuity begins as prescribed by the secretary of the treasury for use in determining present value under subparagraphs (A) and (B) of section 417(e)(3) of the Internal Revenue Code, and such mortality tables shall be based on the actual experience of pension plans and projected trends in such experience as specified in subparagraph (A) of section 430(h)(3) of the Internal Revenue Code without regard to subparagraphs (C) and (D) of that section, and (iii) the applicable interest rate and the modified unisex version of the mortality tables for the plan year in which the annuity begins as prescribed by the secretary of the treasury for use in determining present value under subparagraphs (A) and (B) of section 417(e)(3) of the Internal Revenue Code, and such mortality tables shall be based on the actual experience of pension plans and projected trends in such experience as specified in subparagraph (A) of section 430(h)(3) of the Internal Revenue Code without regard to subparagraphs (C) and (D) of that section , with the result divided by 1.05 .

(G) For a member who has or will have distributions commencing at more than one annuity starting date, the maximum annual benefit shall be determined as of each such annuity starting date (and shall satisfy the limits in section 415 of the Internal Revenue Code as of each starting date), actuarially adjusting for past and future distributions of benefits commencing at the other annuity starting dates as required under the application authority.

(H) The application of the provisions of this rule shall not cause the maximum annual benefit provided to a member to be less than the member's accrued benefit as of the end of December 31, 2007 under provisions of Chapter 3307. of the Revised Code and division 3307:1 of the Administrative Code that were both adopted and in effect prior to April 5, 2007.

(I) Effective January 1, 2009, the term "compensation" as defined in section 3307.01 of the Revised Code includes differential wage payments as defined in section 3401(h)(2) of the Internal Revenue Code.

Effective: 08/07/2014
R.C. 119.032 review dates: 03/24/2019
Promulgated Under: 111.15
Statutory Authority: 3307.04
Rule Amplifies: 3307.46 , 3307.58 , 3307.63 , 3307.67
Prior Effective Dates: 07/16/2009, 09/03/2012