105 KAR 1:430. General Compliance with Federal Tax Laws.

      RELATES TO: KRS 16.505-16.652, 61.510-61.705, 78.510-78.852, 26 U.S.C. 401(a)(7), (8), (25), 414(d),(p),(u), 503(b)

      STATUTORY AUTHORITY: KRS 61.645(9)(g)

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 61.645(9)(g) requires the Board of Trustees of the Kentucky Retirement Systems to promulgate administrative regulations necessary or proper in order to carry out the provisions of KRS 16.505 to 16.652, 61.510 to 61.705, and 78.510 to 78.852 and to conform with federal statute. This administrative regulation establishes Kentucky Retirement Systems' compliance with 26 U.S.C. 401(a); 26 U.S.C. 503(b) in order for Kentucky Employees Retirement System, State Police Retirement System, and County Employees Retirement System to maintain their tax qualified status as public defined benefits plans.

      Section 1. Compliance with 26 U.S.C. 401(a)(7) and 401(a)(8) for Vesting and Forfeitures. (1) A plan member shall be 100 percent vested in the member’s accumulated contributions at all times.

      (2) In conformity with 26 U.S.C. 401(a)(8), any forfeitures of benefits by members or former members of the plan shall not be used to pay benefit increases. However, these forfeitures shall be used to reduce employer contributions.

      Section 2. Compliance with 26 U.S.C. 414(p) for Qualified Domestic Relations Orders. If benefits are payable pursuant to a qualified domestic relations order that meets the requirements of a domestic relations order as defined in 26 U.S.C. 414(p), then the applicable requirements of 26 U.S.C. 414(p) shall be followed by the retirement system.

      Section 3. Compliance with 26 U.S.C. 414(u) for Reemployed Veterans. Effective December 12, 1994, notwithstanding any other provision of the retirement system law; contributions, benefits, and service credit with respect to qualified military service shall be governed by 26 U.S.C. 414(u) and the Uniformed Services Employment and Reemployment Rights Act of 1994.

      Section 4. Compliance with 26 U.S.C. 503(b) for Prohibited Transactions. Effective as of July 1, 1989, the board shall not engage in a transaction prohibited by 26 U.S.C. 503(b).

      Section 5. Compliance with 26 U.S.C. 401(a)(25) for Actuarial Assumptions. Kentucky Retirement Systems shall determine the amount of any benefit that is determined on the basis of actuarial assumptions using assumptions adopted by the board by rule; these benefits shall not be subject to employer discretion. (35 Ky.R. 980; Am. 1730; eff. 2-6-09.)