2006 Kansas Code - 74-49,123

      74-49,123.   Applicability of certain federal internal revenue code provisions to retirement system. (a) This section applies to the Kansas public employees retirement system and to all other public retirement plans administered by the board of trustees.

      (b)   As used in this section:

      (1)   "Federal internal revenue code" means the federal internal revenue code of 1954 or 1986, as amended and as applicable to a governmental plan as in effect on July 1, 1998; and

      (2)   "retirement plan" includes the Kansas public employees retirement system and all other Kansas public retirement plans and benefit structures, which are administered by the board.

      (c)   In addition to the federal internal revenue code provisions otherwise noted in each retirement plan's law, and in order to satisfy the applicable requirements under the federal internal revenue code, the retirement plans shall be subject to the following provisions, notwithstanding any other provision of the retirement plan's law:

      (1)   The board shall distribute the corpus and income of the retirement plan to the members and their beneficiaries in accordance with the retirement plan's law. At no time prior to the satisfaction of all liabilities with respect to members and their beneficiaries shall any part of the corpus and income be used for, or diverted to, purposes other than the exclusive benefit of the members and their beneficiaries.

      (2)   Forfeitures arising from severance of employment, death or for any other reason may not be applied to increase the benefits any member would otherwise receive under the retirement plan's law. However, forfeitures may be used to reduce an employer's contribution.

      (3)   All benefits paid from the retirement plan shall be distributed in accordance with the requirements of section 401(a)(9) of the federal internal revenue code and the regulations under that section. In order to meet these requirements, the retirement plan shall be administered in accordance with the following provisions: (A) Distribution of a member's benefit must begin by the later of the April 1 following the calendar year in which a participant attains age 70 1/2 or the April 1 of the year following the calendar year in which the member retires;

      (B)   the life expectancy of a member or the member's spouse may not be recalculated after the benefits commence;

      (C)   if a member dies before the distribution of the member's benefits has begun, distributions to beneficiaries must begin no later than December 31 of the calendar year immediately following the calendar year in which the member died, except as provided in subsection (6) of K.S.A. 74-4918 and amendments thereto; and

      (D)   the amount of benefits payable to a member's beneficiary may not exceed the maximum determined under the incidental death benefit requirement of the federal internal revenue code.

      (4)   Distributions from the retirement plans may be made only upon retirement, separation from service, disability or death.

      (5)   The board or its designee may not:

      (A)   determine eligibility for benefits;

      (B)   compute rates of contribution; or

      (C)   compute benefits of members or beneficiaries, in a manner that discriminates in favor of members who are considered officers, supervisors or highly compensated, as prohibited under section 401(a)(4) of the federal internal revenue code.

      (6)   Subject to the provisions of this subsection, benefits paid from, and employee contributions made to, the retirement plans shall not exceed the maximum benefits and the maximum annual additions, respectively, permissible under section 415 of the federal internal revenue code.

      (A)   Beginning January 1, 1995, a participant may not receive an annual benefit that exceeds the dollar amount specified in section 415(b)(1)(A) of the federal internal revenue code, subject to the applicable adjustments in section 415 of the federal internal revenue code, except as provided in clause (C) of this subsection.

      (B)   Notwithstanding any other provision of law to the contrary, the board may modify a request by a participant to make a contribution to the retirement plans if the amount of the contribution would exceed the limits under section 415(c) or 415(n) of the federal internal revenue code subject to the following:

      (i)   Where the retirement plan's law requires a lump-sum payment, for the purchase of service credit, the board may establish a periodic payment plan in order to avoid a contribution in excess of the limits under section 415(c) or 415(n) of the federal internal revenue code.

      (ii)   An eligible participant in a retirement plan, as defined by section 1526 of the federal taxpayer relief act of 1997, may purchase service credit without regard to the limitations of section 415 (c)(1) of the federal internal revenue code as provided by state law in effect on August 5, 1997.

      If the board's option under subdivision (i) will not avoid a contribution in excess of the limits under section 415(c) or 415(n) of the federal internal revenue code, the board shall reduce or deny the contribution.

      (C)   Subject to approval by the internal revenue service, the board shall maintain a qualified governmental excess benefit arrangement under section 415(m) of the federal internal revenue code. The board shall establish the necessary and appropriate procedures for the administration of such benefit arrangement under the federal internal revenue code. The amount of any annual benefit that would exceed the limitations imposed by section 415 of the federal internal revenue code shall be paid from this benefit arrangement. The amount of any contribution that would exceed the limitations imposed by section 415 of the federal internal revenue code shall be credited to this benefit arrangement. The qualified excess benefit arrangement shall be a separate portion of the retirement plan. The qualified excess benefit arrangement is subject to the following requirements:

      (i)   The benefit arrangement shall be maintained solely for the purpose of providing to participants in the retirement plans that part of the participant's annual benefit otherwise payable under the terms of the act that exceeds the limitations on benefits imposed by section 415 of the federal internal revenue code; and

      (ii)   participants do not have an election, directly or indirectly, to defer compensation to the excess benefit arrangement.

      (D)   Prior to January 1, 1998, the definition of compensation, wages, salary or other similar term when used for purposes of determining compliance with section 415 of the federal internal revenue code does not include the amount of any elective deferral, as defined in section 402(g)(3) of the federal internal revenue code, or any contribution which is contributed or deferred by the employer at the election of the employee and which is not includable in the gross income of the employee by reason of section 125 or 457 of the federal internal revenue code.

      (7)   The board may not engage in a transaction prohibited by section 503(b) of the federal internal revenue code.

      (8)   To the extent required by section 401(a)(31) of the federal internal revenue code, the board shall allow members and qualified beneficiaries to elect a direct rollover of eligible distributions to another eligible retirement plan. Notwithstanding any law to the contrary, the board may accept a direct or indirect rollover of eligible distributions for the purpose of the purchase of service credit. In addition, the board may accept a direct trustee to trustee transfer from a deferred compensation plan under section 457(b) of the federal internal revenue code or a tax sheltered annuity under section 403(b) of the federal internal revenue code for: (A) The purchase of permissive service credit, as defined under section 415(n)(3)(A) of the federal internal revenue code; or (B) a repayment to which section 415 of the federal internal revenue code does not apply pursuant to section 415(k)(3) of the federal internal revenue code. Any such transfer shall be allowed as provided in this subsection to the extent permitted by law, subject to any conditions, proofs or acceptance established or required by the board or the board's designee.

      (9)   Where required by the act, an employer shall pick up and pay contributions that would otherwise be payable by members of a retirement plan in accordance with section 414(h)(2) of the federal internal revenue code as follows:

      (A)   The contributions, although designated as employee contributions, are being paid by the employer in lieu of contributions by the employee;

      (B)   the employee must not have been given the option of receiving the amounts directly instead of having them paid to the retirement plan; and

      (C)   the pickup shall apply to amounts that a member elects to contribute to receive credit for prior or participating service if the election is irrevocable and applies to amounts contributed before retirement.

      (10)   Notwithstanding any provision of this plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with section 414(u) of the federal internal revenue code.

      (11)   Upon the complete or partial termination of a retirement plan, the rights of members to benefits accrued to the date of termination, to the extent funded, or to the amounts in their accounts are nonforfeitable, and amounts in their accounts may be distributed to them.

      (d)   The plan year for the retirement plan begins on July 1.

      (e)   The limitation year for purposes of section 415 of the federal internal revenue code is the calendar year.

      History:   L. 1998, ch. 64, § 83; L. 2002, ch. 116, § 9; May 23.