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Oregon Bulletin

September 1, 2011

 

Oregon Public Employees Retirement System
Chapter 459

Rule Caption: Clarify administration of combined and concurrent service membership and retirement benefits.

Adm. Order No.: PERS 4-2011

Filed with Sec. of State: 8-4-2011

Certified to be Effective: 8-4-11

Notice Publication Date: 5-1-2011

Rules Adopted: 459-010-0019, 459-013-0050

Rules Repealed: 459-010-0165, 459-010-0170

Subject: This rulemaking adopts two new rules to capture and clarify the standards to be used in making retirement eligibility determinations and benefit calculations, and repeals two obsolete rules:

      459-010-0019, Retirement Eligibility - This new rule clarifies the retirement eligibility of combined and concurrent job classes.

      459-013-0050, Combined Service - This new rule provides a method for applying statutory factors to employment periods with different job classes.

      459-010-0165, Transfer into a New Classification - This rule is being repealed and becomes redundant with the new rule.

      459-010-0170, Retirement Age and Contribution Rate of One Employed in Two Classes of Service - This rule is being repealed and becomes redundant with the new rule.

Rules Coordinator: Daniel Rivas—(503) 603-7713

459-010-0019

Retirement Eligibility

(1) A member’s most recent qualifying position at the time of separation from service with all participating employers establishes the member’s classification for purposes of normal and early service retirement eligibility and disability retirement allowance calculations except:

(a) A member employed in a qualifying position as a police officer or firefighter who reaches earliest retirement age under ORS 238.280 retains retirement eligibility as a police officer or firefighter. A member described in this subsection who subsequently is employed in a qualifying position as other than a police officer or firefighter retains retirement eligibility as a police officer or firefighter.

(b) A member who separates from service in a qualifying position as a police officer or firefighter before reaching earliest retirement age under ORS 238.280 retains classification as a police officer or firefighter provided the member does not return to a qualifying position as other than a police officer or firefighter before reaching earliest retirement age under ORS 238.280.

(c) A member employed in a qualifying position as other than a police officer or firefighter who reaches earliest retirement age under ORS 238.280 retains retirement eligibility as other than a police officer or firefighter.

(2) A member who is employed by one employer in qualifying positions as a police officer or firefighter and as other than a police officer or firefighter is a police officer or firefighter for purposes of this rule.

(3) A member who is concurrently employed by two or more employers in qualifying positions as a police officer or firefighter and as other than a police officer or firefighter is a police officer or firefighter for purposes of this rule.

Stat. Auth.: ORS 238.650

Stats. Implemented: ORS 238.280, 238.300, 238.320

Hist.: PERS 4-2011, f. & cert. ef. 8-4-11

459-013-0050

Combined Service

(1) For purposes of this rule:

(a) “Combined service” means periods of active membership in two or more different classifications.

(b) “Concurrent service” means active membership for the same period with two or more different employers in two or more different classifications or actuarial groups.

(2) A member who has combined service shall have their service retirement or disability retirement allowance calculated as provided in ORS Chapter 238 and this rule. The benefit calculations may include:

(a) Account balance, and final average salary as of the effective retirement date;

(b) Creditable service as provided under OAR 459-010-0014;

(c) Prorated creditable service for periods of concurrent service;

(d) All calculation methods applicable to the member under ORS 238.300 or 238.320;

(e) The optional forms of retirement allowance selected by the member under ORS 238.305 or 238.325;

(f) For early and normal retirement eligibility, the rules as described in OAR 459-010-0019;

(g) A statutory factor applicable for the classification of the member during each period of creditable service;

(h) A single early retirement factor, if applicable;

(i) The actuarial equivalency factor tables in effect on the effective retirement date; and

(j) A variable adjustment for members who participated in the Variable Annuity Program on and after January 1, 1982.

Stat. Auth.: ORS 238.650

Stats. Implemented: ORS 238.260, 238.280, 238.300, 238.305, 238.320 & 238.325

Hist.: PERS 4-2011, f. & cert. ef. 8-4-11

 

Rule Caption: Clarify Social Security administration and repeal obsolete rules.

Adm. Order No.: PERS 5-2011

Filed with Sec. of State: 8-4-2011

Certified to be Effective: 8-4-11

Notice Publication Date: 5-1-2011

Rules Amended: 459-020-0015, 459-020-0030, 459-020-0050

Rules Repealed: 459-020-0005, 459-020-0010, 459-020-0012, 459-020-0020, 459-020-0025, 459-020-0035, 459-020-0040, 459-020-0045, 459-020-0055

Subject: ORS 237.410 to 237.515 govern the extension of Social Security benefits to employees of the state and certain political subdivisions. Under these statutes, the Public Employees Retirement Board administers the state of Oregon’s responsibilities under the Social Security coverage agreement. As such, the PERS Board has promulgated rules detailing its administration of the program; those rules have not been reviewed or modified in quite awhile, but are now being updated through this rulemaking process. Several of the rules are being repealed because the content is either obsolete or already sufficiently covered in state and federal law.

Rules Coordinator: Daniel Rivas—(503) 603-7713

459-020-0015

Collection of Pro Rata Share of Administrative Expenses

(1) Each public agency, as defined in ORS 237.410, must pay to the Board an amount determined by the Board to be the public agency’s obligation for administrative expenses incurred by the Board in the administration of ORS 237.410 to 237.515.

(2) The Board will determine administrative expenses for a period of 12 calendar months beginning July 1 of each year and allocate the expenses to each public agency in proportion to the number of employees reported to the Board by the public agency. The Board will invoice each public agency for:

(a) A minimum amount of $15.00; and

(b) The public agency’s pro rata share of administrative expenses, to the extent that amount exceeds $15.00.

(3) Administrative expenses charged to a public agency must be paid to the Board no later than 30 days after the date the invoice is issued.

Stat. Auth.: ORS 237.470

Stats. Implemented: ORS 237.500

Hist.: PER 9, f. 12-15-55; PERS 21-2005, f. & cert. ef. 11-1-05; PERS 5-2011, f. & cert. ef. 8-4-11

459-020-0030

Information and Records from Employer

(1) Upon request from the Board, an employer must provide to the Board records and information, including:

(a) Personnel information;

(b) Possible exclusions from coverage;

(c) Employer’s legal name and status;

(d) Federal employer identification number;

(e) Employee-employer relationship; or

(f) Information requested by the Commissioner of Social Security.

(2) If 30 days have elapsed from the date of the Board’s request, the Board may, without further notice, send a staff member to the employer’s premises to examine the employer’s records and obtain the necessary reports. The employer shall make its records available to the Board’s staff during normal business hours. The entire cost of such examination shall be paid by the employer.

Stat. Auth.: ORS 237.470

Stats. Implemented: ORS 237.480

Hist.: PER 9, f. 12-15-55; PER 7-1981, f. & ef. 3-5-81; PERS 5-2011, f. & cert. ef. 8-4-11

459-020-0050

Application for Inclusion

A public agency, as defined in ORS 237.410, may apply to the Board for inclusion in the agreement under ORS 237.440 by submitting to the Board:

(1) A resolution by the agency’s legislative or governing body requesting inclusion in the agreement entered into by the Board under ORS 237.414; and

(2) A completed Social Security coverage Application and Agreement.

Stat. Auth.: ORS 237.470

Stats. Implemented: ORS 237.440

Hist.: PER 9, f. 12-15-55; PER 6-1981, f. & ef. 3-5-81; PERS 21-2005, f. & cert. ef. 11-1-05; PERS 5-2011, f. & cert. ef. 8-4-11

 

Rule Caption: Adopt new rule and permanent rule modifications relating to new OSGP Self-Directed Brokerage Option.

Adm. Order No.: PERS 6-2011

Filed with Sec. of State: 8-4-2011

Certified to be Effective: 8-4-11

Notice Publication Date: 5-1-2011

Rules Adopted: 459-050-0120

Rules Amended: 459-050-0037, 459-050-0077, 459-050-0150, 459-050-0300

Subject: The Oregon Investment Council (OIC) approved the addition of a Self-Directed Brokerage Option (SDBO) to the Oregon Savings Growth Plan (OSGP). A new rule, OAR 459-050-0120, was developed at Treasury’s request to impose some restrictions on the use of the SDBO. The rule provides that a participant’s account balance must be at least $20,000 to begin participating in the SDBO and, at any time, the amount of the trade may not exceed 50% of the participant’s OSGP account balance on the date of the trade. Also, subsequent trades cannot be made if the trade would cause the participant’s balance in the SDBO to exceed 50% of the participant’s OSGP account balance on the day of the trade.

      In addition, Dwight Asset Management, which manages the Stable Value Option fund for OSGP, requires a restriction to be placed on transfers to the SDBO in the same manner as it currently applies to the Short Term Fixed and Intermediate Bond options. As such, the trading restrictions in OAR 459-050-0037 are proposed to be modified to specify that no trade may move monies directly from the Stable Value Option to the SDBO.

      A participant’s funds in the SDBO are not available for loans, unforeseeable emergency withdrawals, or distributions, including Required Minimum Distributions. Therefore, proposed modifications to OAR 459-050-0077, 459-050-0150 and 459-050-0300 address this.

      Unrelated to the SDBO option but while the rule is open for rulemaking, modifications are proposed to OAR 459-050-0150 to eliminate the requirement that the unforeseeable emergency occur within a defined period before or after application for the emergency withdrawal.

Rules Coordinator: Daniel Rivas—(503) 603-7713

459-050-0037

Trading Restrictions

The purpose of this rule is to establish criteria under which a participant may make trades in the Deferred Compensation Program. The Program is designed for long-term investment and periodic adjustment of asset allocation. Restrictions upon trades are necessary to protect participants and the Program from adverse financial impact attributable to frequent trading. Frequent trading by some participants can lower returns and increase transaction costs for all participants. Frequent trading can trigger the imposition of redemption fees and restrictions by mutual funds within the Program and may cause the Program to be eliminated as an allowable investor in an investment fund.

(1) Definitions. For the purposes of this rule:

(a) “Investment Option” means an investment alternative made available under ORS 243.421.

(b) “Trade” means a purchase or redemption in an investment option for the purpose of moving monies between investment options.

(2) Restrictions.

(a) The following restrictions apply to all participants:

(A) A participant may not make a trade that exceeds $100,000.

(B) A purchase that is attributable to a trade may not be redeemed from the International Stock Option for a period of 30 days following the date of the trade.

(C) No trade may move monies directly from the Stable Value Option to the Short-Term Fixed Income Option, the Intermediate Bond Option, or the Self-Directed Brokerage Option.

(b) Trades to the Self-Directed Brokerage Option are subject to subsection (a) of this section and the limitations established in OAR 459-050-0120.

(3) The Deferred Compensation Manager, if necessary to comply with trading restrictions imposed by a participating mutual fund or the Securities and Exchange Commission, may establish additional temporary trading restrictions.

(4) The Deferred Compensation Manager, in the event of extraordinary market conditions, may temporarily suspend any or all trading restrictions established by this rule.

(5) Any action taken by the Deferred Compensation Manager under sections (3) or (4) of this rule must be presented to the Board at its next scheduled meeting. The Board may take action as authorized by ORS 243.401 to 243.507. If the Board does not act, the action(s) taken by the Deferred Compensation Manager shall expire on the first business day following the date of the meeting.

(6) The provisions of this rule are not applicable to trades attributable to the operation of an automatic account rebalancing function offered by the Program.

(7) The trading restrictions provided in this rule are not exclusive. The Board may establish additional restrictions or sanctions as authorized by ORS 243.401 to 243.507.

Stat. Auth.: ORS 243.470

Stats. Implemented: ORS 243.401 - 243.507

Hist.: PERS 4-2007, f. 1-23-07, cert. ef. 5-1-07; PERS 17-2008, f. & cert. ef. 11-26-08; PERS 6-2011, f. & cert. ef. 8-4-11

459-050-0077

Loan Program

(1) Definitions. For purposes of this rule:

(a) “Cure period” is that time from when a default occurs until the end of the quarter following the quarter in which the default occurred.

(b) “Deferred compensation account” means the account described in OAR 459-050-0001(9), but does not include any amount in the Self-Directed Brokerage Option.

(c) “Loan balance” means the outstanding principal and accrued interest due on the loan.

(d) “Participant Loan” means a loan that only affects the deferred compensation account of a participant.

(e) “Promissory note” means the agreement of loan terms between the Program and a participant.

(f) “Third Party Administrator (TPA)” means the entity providing record keeping and administrative services to the Program.

(2) Eligibility for loan. Participants who are currently employed by a Plan Sponsor that has agreed to participate in a Participant Loan program are eligible for a Participant Loan. Retired participants, participants separated from employment, designated beneficiaries, and alternate payees are not eligible.

(3) Application for loan: A participant must apply for a loan and meet the requirements set forth in this rule.

(a) Once a loan is approved, a participant must execute a promissory note in the form prescribed by the Program.

(b) If a participant is deceased before the disbursement of the proceeds of a loan, the participant’s loan application shall be void as of the date of death.

(4) Loan Types:

(a) General purpose loan — a loan not taken for the purpose of acquiring a principal residence. General purpose loans must be repaid over a non-renewable repayment period of up to five years.

(b) Residential loan — a loan made for the purpose of acquiring a principal residence, which is, or within a reasonable time shall be, the principal residence of the participant. Residential loans must be repaid over a non-renewable repayment period of up to 15 years. A refinancing does not qualify as a residential loan. However, a loan from the Program that will be used to repay a loan from a third party will qualify as a residential loan if the loan would qualify as a residential loan without regard to the loan from the third party.

(5) Interest Rate: The rate of interest for a loan shall be fixed at one percent (1%) above the prime interest rate as published by the Wall Street Journal on the last business day of the month before the month in which the loan is requested.

(6) Loan Fees: A loan fee of $50.00 shall be assessed when the loan is approved. The fee shall be deducted from a participant’s deferred compensation account on a pro-rata basis from existing investments.

(7) Loan Limitations:

(a) The maximum loan amount is the lesser of:

(A) $50,000; or

(B) One-half of the value of the participant’s deferred compensation account on the date the loan is made.

(b) The minimum loan amount is $1000.

(c) A participant may only have one outstanding loan.

(d) A participant who has received a loan may not apply for another loan until 12 months from the date the previous loan was paid in full.

(8) Source of Loan: The loan amount will be deducted from a participant’s deferred compensation account.

(a) Loan amounts will be deducted pro-rata from existing investments in a participant’s deferred compensation account.

(b) A participant may not transfer a loan to or from another retirement or deferred compensation plan.

(9) Repayment Terms: The loan amount will be amortized over the repayment period of the loan with interest compounded daily to calculate a level payment for the duration of the loan.

(a) Loan payments must be made by payroll deduction. To receive a loan from the Program a participant must enter into a payroll deduction agreement. For the purposes of this rule, a promissory note or other document that includes the payroll deduction amount and is signed by a participant as a requirement to obtain a loan may be a payroll deduction agreement. Except as provided in this rule, a participant may not submit a loan payment directly to the Program or the Third Party Administrator.

(b) A participant is responsible for loan repayment even if the employer fails to deduct or submit payments as directed under the payroll deduction agreement. To avoid defaulting on a loan by reason of the employer’s failure to deduct or submit a payment a participant may submit a loan payment by sending a money order or certified check to the Third Party Administrator.

(c) A participant may repay the loan balance in a single payment at any time before the date the final loan payment is due.

(d) Partial payment of a scheduled payment and partial prepayment or advance payment of future payments shall not be permitted.

(e) Loan payments will be allocated in a participant’s deferred compensation account in the same manner as the participant’s current contribution allocation. If, for any reason, the allocation is not known, the payment will be allocated to the Short-Term Fixed Income Option.

(f) Any overpayment will be refunded to the participant.

(10) Leave of Absence. Terms of outstanding loans are not subject to revision except as provided in this section.

(a) Loan payments may be suspended up to one year during an authorized leave of absence if a participant’s pay from the employer does not at least equal the payment amount.

(A) Interest on a loan continues to accrue during a leave of absence.

(B) A participant must immediately resume payments by payroll deduction upon return to work.

(C) The loan balance will be re-amortized upon the participant’s return to work to be repaid within the remaining loan repayment period.

(D) Loan payments may be revised to extend the remaining loan repayment period to the maximum period allowed in the event the loan originally had a term shorter than the maximum period allowed under section (4) of this rule.

(E) If a participant is on a leave of absence that exceeds one year, the loan shall be in default unless repayment begins one year from the participant’s last date worked or the date the final payment is due under the promissory note, whichever is earlier.

(b) Military Leave. Loan payments for participants on military leave may be suspended for the period of military service.

(A) A leave of absence for military service longer than one year will not cause a loan to be in default.

(B) Loan payments by payroll deduction must resume upon the participant’s return to work.

(C) The original repayment period of a loan will be extended for the period of military service or to the maximum repayment period allowed for that type of loan, whichever is greater.

(D) Interest on a loan continues to accrue during a leave of absence for military service. If the interest rate on the loan is greater than 6%, then under the provisions of the Servicemembers Civil Relief Act of 2003, the rate shall be reduced to 6% during the period of military service.

(E) The loan balance will be re-amortized upon the participant’s return to work to be repaid within the remaining loan repayment period as determined under paragraph (C) of this subsection.

(c) A participant on an authorized leave of absence or military leave may submit loan payments by sending a money order or certified check to the Third Party Administrator.

(11) Tax Reporting.

(a) The loan balance of a general purpose loan will be reported as a taxable distribution to the participant on the earlier of the last day of the loan repayment period, as adjusted under paragraphs (10)(a)(D) or (10)(b)(C) of this rule, if applicable, or if the loan is in default, the last day of the cure period.

(b) The loan balance of a residential loan will be reported as a taxable distribution to the participant on the earlier of the last day of the loan repayment period, as adjusted under paragraphs (10)(a)(D) or (10)(b)(C) of this rule, if applicable, or if the loan is in default, the last day of the cure period.

(c) If a participant dies before the loan balance being repaid, and the participant’s beneficiary does not repay the loan balance in a single payment within 90 days of the participant’s death, the loan balance will be reported as a taxable distribution to the estate of the participant.

(d) If a participant is eligible to receive a distribution under the Program, the reporting of a loan balance as a taxable distribution under this section will cancel the loan at the time the taxable distribution is reported. A canceled loan is a distribution and is no longer outstanding in a participant’s account.

(e) If a participant is not eligible to receive a distribution under the Program, a loan balance reported as a taxable distribution under this section will be a deemed distribution for tax reporting purposes. A loan deemed distributed may not be canceled until the loan balance is repaid or the participant becomes eligible to receive a distribution. The loan balance will remain outstanding in the participant’s account and will continue to accrue interest until repaid or canceled.

(12) Default.

(a) A loan is in default if a payment is not paid as scheduled or under any of the provisions set forth in this rule, the promissory note, or any related loan agreement.

(b) A loan is in default if the participant separates from employment with the plan sponsor that administers the loan payment payroll deductions.

(c) If a participant with a loan in default resumes loan payments by payroll deduction before the end of the cure period, the default will be cured. The participant must pay any missed payments and accrued interest before the end of the loan repayment period.

(d) Except as provided in subsection (c) of this section, if the participant does not cure a default by repaying the loan balance before the end of the cure period, the loan balance will be reported as a taxable distribution to the participant as provided in section (11) of this rule.

Stat. Auth.: ORS 243.470

Stats. Implemented: ORS 243.401 – 243.507

Hist.: PERS 4-2007, f. 1-23-07, cert. ef. 5-1-07; PERS 8-2007, f. & cert. ef. 7-26-07; PERS 6-2011, f. & cert. ef. 8-4-11

459-050-0120

Self-Directed Brokerage Option

(1) For purposes of this rule:

(a) “Core Investment Option” means an investment alternative made available under ORS 243.421, but does not include the Self-Directed Brokerage Option.

(b) “Self-Directed Brokerage Option” means an investment alternative made available under ORS 243.421 that permits a participant to establish a brokerage account and participate in investment products other than core investment options.

(c) “Trade” has the same meaning as in OAR 459-050-0037.

(2) A participant may initiate participation in the Self-Directed Brokerage Option only by a trade from core investment options.

(a) The participant’s deferred compensation account balance must be at least $20,000 on the date of the trade.

(b) The amount of the trade may not exceed 50 percent of the participant’s deferred compensation account balance on the date of the trade.

(3) A participant in the Self-Directed Brokerage Option may not:

(a) Contribute to the Self-Directed Brokerage Option by any means other than a trade from a core investment option.

(b) Make a trade from a core investment option to the Self-Directed Brokerage Option if:

(A) The participant’s balance in the Self-Directed Brokerage Option exceeds the balance in the participant’s core investment options on the date of the trade; or

(B) The trade would cause the participant’s balance in the Self-Directed Brokerage Option to exceed the participant’s balance in the core investment options on the date of the trade.

(4) The Self-Directed Brokerage Option may not be included in any automatic account rebalancing function offered by the Program.

(5) Notwithstanding OAR 459-050-0080, funds in the Self-Directed Brokerage Option are not available for distribution.

(a) Funds in the Self-Directed Brokerage Option must be traded to a core investment option to be available for distribution under OAR 459-050-0080.

(b) A participant, beneficiary, or alternate payee subject to Required Minimum Distributions, as described in OAR 459-050-0300, must maintain a balance in the core investment options that will accommodate the timely distribution of the required amount.

(c) A participant, beneficiary, or alternate payee who fails to comply with subsection (b) of this section is solely responsible for any tax, penalty, or cost imposed by reason of a delayed or partial required minimum distribution.

(6) The Deferred Compensation Manager, if necessary to comply with restrictions imposed by a participating mutual fund, a contracted broker, or the Securities and Exchange Commission, may establish additional temporary restrictions for the Self-Directed Brokerage Option.

(7) Any action taken by the Deferred Compensation Manager under section (6) of this rule must be presented to the Board at its next scheduled meeting. The Board may take action as authorized by ORS 243.401 to 243.507. If the Board does not act, the action(s) taken by the Deferred Compensation Manager shall expire on the first business day following the date of the meeting.

(8) The restrictions provided in this rule are not exclusive. The Board may establish additional restrictions or sanctions as authorized by ORS 243.401 to 243.507.

Stat. Auth.: ORS 243.470

Stats. Implemented: ORS 243.401 - 243.507

Hist.: PERS 6-2011, f. & cert. ef. 8-4-11

459-050-0150

Unforeseeable Emergency Withdrawal

The purpose of this rule is to establish the criteria and process for a participant to obtain a distribution of deferred compensation funds before separation from employment due to an unforeseeable emergency.

(1) Definitions. For purposes of this rule:

(a) “Deferred compensation account” means the account described in OAR 459-050-0001(9), but does not include any amount in the Self-Directed Brokerage Option.

(b) “Emergency withdrawal” means a payment to the participant from the participant’s deferred compensation account in an amount directly related to and reasonably necessary to satisfy a financial obligation attributable to an unforeseeable emergency.

(c) “Unforeseeable emergency” or “Unforeseen emergency” means a severe financial hardship to a participant resulting from a sudden and unexpected illness or accident of the participant or of a dependent of the participant as defined in 26 CFR 1.152-1, a loss of the participant’s property due to casualty or other similar extraordinary and unforeseeable circumstance beyond the control of the participant.

(2) Eligibility for emergency withdrawals. Only a participant who established a deferred compensation account as an eligible employee and has not terminated from employment with their plan sponsor may apply to receive an unforeseeable emergency withdrawal. An alternate payee of a participant shall not be eligible to receive an emergency withdrawal.

(3) A participant must, if eligible, apply for a loan under the provisions of OAR 459-050-0077 before application for an unforeseen emergency withdrawal unless, as determined by the Deferred Compensation Manager, the participant would suffer additional financial hardship by complying with the loan application requirement.

(4) Circumstances that do not constitute an unforeseeable emergency. An emergency withdrawal shall not be approved for any reason other than an unforeseeable emergency. Circumstances that do not constitute an unforeseeable emergency include, but are not limited to:

(a) Participant or dependent school expenses;

(b) The purchase of a home or costs associated with a voluntary relocation of housing;

(c) The reduction of personal credit liabilities not associated with an unforeseeable emergency;

(d) Expenses associated with a legal separation or the dissolution of a marriage;

(e) Expenses associated with medical procedures that are elective or not medically required;

(f) Expenses associated with establishing or managing a personal business;

(g) Recreational expenses;

(h) Travel expenses not associated with an unforeseeable emergency; and

(i) Usual and customary tax obligations.

(5) Limitations on amount of emergency withdrawal. The amount of an emergency withdrawal may not exceed the balance of the participant’s deferred compensation account. The maximum amount that may be approved as an emergency withdrawal shall be limited to what is reasonably needed to satisfy the immediate financial obligation related to the unforeseeable emergency, including taxes anticipated on the distribution. The amount of the emergency withdrawal shall be limited to the extent that the financial obligation can or may be satisfied by:

(a) Reimbursement or compensation by insurance or otherwise;

(b) Liquidation of the participant’s assets, to the extent the liquidation of such assets would not itself cause severe unforeseeable emergency; or

(c) Cessation of participant contributions to the Deferred Compensation Program.

(6) Application for an emergency withdrawal. A participant must submit a completed emergency withdrawal application and financial information and related documentation sufficient to satisfy the provisions of this rule. The emergency withdrawal application may be returned if incomplete or if insufficient financial information or related documentation is submitted.

(a) The application form may be obtained from the Deferred Compensation Program or the third party administrator (TPA) retained to administer a portion of the Deferred Compensation Program.

(b) The completed application, financial information, and related documentation shall be submitted by use of the United State Postal Service or by private carrier as defined in ORS 293.660(2) for initial review.

(7) Cancellation of future contributions. Contributions by a participant to the Deferred Compensation Program shall immediately be cancelled upon receipt of an application for an emergency withdrawal from the participant.

(a) A participant who receives approval for an emergency withdrawal shall be prohibited from making elective deferrals and contributions to the Deferred Compensation Program for a period of six consecutive months from the date of distribution.

(b) A participant who receives a denial for an emergency withdrawal may enroll to make elective deferrals and contributions to the Deferred Compensation Program at any time.

(8) Approval or denial notification. The Deferred Compensation Manager or an authorized designee shall approve or deny a request for an emergency withdrawal within three working days after receipt of an accepted application. The participant will be notified by mail within ten days after a decision is made.

(9) Release of payment upon approval of an emergency withdrawal. The Deferred Compensation Manager or an authorized designee shall determine the method of payment. The Deferred Compensation Program shall immediately notify the TPA to release the requested funds.

(10) A participant may appeal a denial of an emergency withdrawal to the Unforeseeable Emergency Withdrawal Appeals Committee as provided in OAR 459-050-0040. The appeal shall be in writing and must include:

(a) A request for review by the Unforeseeable Emergency Withdrawal Appeals Committee;

(b) A short statement of the facts that are the basis of the appeal; and

(c) Any additional information or documentation to support the request for an emergency withdrawal.

(11) Number of emergency withdrawal requests. The number of times a participant may apply for an emergency withdrawal is unlimited and is unaffected by previous applications.

Stat. Auth: ORS 243.470

Stats. Implemented: ORS 243.401 - 243.507

Hist.: PERS 5-2000, f. & cert. ef. 8-11-00; PERS 28-2004, f. & cert. ef. 11-23-04; PERS 3-2007, f. & cert. ef. 1-23-07; PERS 6-2011, f. & cert. ef. 8-4-11

459-050-0300

Required Minimum Distribution Requirements

(1) Definitions. The following definitions apply for the purposes of this rule:

(a) “Designated Beneficiary” means:

(A) A natural person designated as a beneficiary by the participant, alternate payee, or surviving beneficiary as provided in OAR 459-050-0060; or

(B) If a trust is designated as a beneficiary, the individual beneficiaries of the trust will be treated as designated beneficiaries if the trust satisfies the requirements in section (2) of this rule and applicable Treasury Regulations, including but not limited to Proposed Treasury Regulation Section 1.401(a)(9)-1, Q&A-D-5.

(C) If the beneficiary is not a person or a trust satisfying these requirements, the participant, alternate payee, or surviving beneficiary will be deemed to have no designated beneficiary only for purposes of required minimum distributions under IRC 409(a)(9) and distribution shall be made in accordance with section (11) of this rule.

(b) “Life Expectancy” means the length of time a person of a given age is expected to live as set forth in Treasury Regulation Section 1.72-9. Required minimum distributions shall be calculated so as to satisfy the requirements of Section 401(a)(9) using the life expectancy tables provided in Treasury regulations. Life expectancies shall not be recalculated after the initial determination, except as otherwise required under Oregon or federal law.

(c) “Required Beginning Date” means April 1 of the calendar year following the later of:

(A) The calendar year in which the participant reaches 70-1/2 years of age; or

(B) The calendar year in which the participant retires.

(d) “Required Commencement Date” means the date that the deferred compensation plan must begin to distribute all or part of an account to a surviving beneficiary.

(2) A trust as beneficiary. If a trust is designated as a beneficiary, the individual beneficiaries of the trust will be treated as designated beneficiaries as defined in paragraph (1)(c)(B) if by December 31 of the calendar year following the death of a person who designated a trust as beneficiary, the trust satisfies the following conditions:

(a) The trust must be irrevocable, or become irrevocable by its terms at the time of the person’s death;

(b) The trust’s beneficiaries must be natural persons who are identifiable from the trust instrument; and

(c) One of the following must be provided to the Deferred Compensation Program:

(A) A list of all beneficiaries of the trust, including contingent beneficiaries, along with a description of the portion to which they are entitled and any conditions on their entitlement, all corrected certifications of trust amendments, and a copy of the trust instrument if requested by the Deferred Compensation Program; or

(B) A copy of the trust instrument and copies of any amendments after they are adopted.

(3) Applicable law. Distributions under the Deferred Compensation Program shall be made in accordance with Internal Revenue Code (IRC) Section 401(a)(9), Treasury regulations, Internal Revenue Service rulings and other interpretations issued, including Proposed Treasury Regulation Section 1.401(a)(9)-2. IRC Section 401(a)(9) overrides the provisions of this rule and any other statute or rule pertaining to the required minimum distribution requirements and any manners of distributions, if they are found to be inconsistent with IRC Section 401(a)(9).

(a) If a participant, alternate payee, or surviving beneficiary has not begun distribution or elected a minimum distribution by the beginning date or commencement date required in this rule and IRC Section 401(a)(9), the Deferred Compensation Program shall begin distribution of the minimum amount required as provided under OAR 459-050-0080(2)(e) or, if required, the entire account. Distribution under this subsection is subject to the provisions of OAR 459-050-0120(5).

(b) The required minimum distribution amount may never exceed the entire account balance on the date of distribution.

(4) Minimum distribution requirements for participants. Distributions must begin no later than the participant’s required beginning date.

(a) The participant’s entire account balance shall be distributed over the participant’s life expectancy or over a period not extending beyond the participant’s life expectancy without regard to the designated beneficiary’s age unless the designated beneficiary is a spouse who is more than 10 years younger than the participant.

(b) If the designated beneficiary is a spouse and is more than 10 years younger than the participant, the entire account balance shall be distributed over the joint lives of the participant and the designated beneficiary.

(5) Minimum distribution requirements for alternate payees. The minimum distribution requirements applicable to an alternate payee are determined by whether a Qualified Domestic Relations Order (QDRO) allocates a separate account to the alternate payee or provides that a portion of a participant’s benefit is to be paid to the alternate payee.

(a) If a separate account is established in the name of the alternate payee under OAR 459-050-0210, required minimum distributions to the alternate payee must begin no later than the participant’s required beginning date. The alternate payee’s entire account balance shall be distributed over the alternate payee’s life expectancy or over a period not extending beyond the alternate payee’s life expectancy.

(b) If no separate account is established in the name of the alternate payee and the alternate payee is paid a portion of a participant’s benefit, the alternate payee’s portion of the benefit shall be aggregated with the amount distributed to the participant and will be treated, for purposes of meeting the minimum distribution requirement, as if it had been distributed to the participant.

(6) Manners of distribution available to surviving designated beneficiaries. A surviving designated beneficiary may choose a manner of distribution and apply for a distribution as provided for in OAR 459-050-0080. If the distribution to a participant or alternate payee has begun in accordance with section 401(a)(9)(A)(ii) and the participant dies before the entire account has been distributed or after distributions are required to begin under section (4) of this rule, distributions to the surviving designated beneficiary must be made at least as rapidly as under the manner of distribution used before the participant’s or alternate payee’s death.

(7)(a) Distributions treated as having begun. Distributions from an individual account are not treated as having begun to a participant in accordance with section 401(a)(9)(A)(ii) until the participant’s required minimum distribution beginning date, without regard to whether distributions from an individual account have been made before the required beginning date.

(b) If distribution has been made before the required beginning date in the form of an irrevocable annuity, the distributions are treated as having begun if a participant dies after the annuity starting date but before the required beginning date. The annuity starting date will be deemed the required minimum distribution beginning date.

(8) Required commencement date for a surviving designated beneficiary. If a participant dies before distributions are required to begin or are treated as having begun, the entire account balance must be distributed by December 31 of the calendar year containing the fifth anniversary of the participant’s death, unless the beneficiary makes the following distribution election in the manner prescribed by the Deferred Compensation Plan:

(a) Distributions must begin no later than December 31 of the calendar year following the year of the participant’s or alternate payee’s death; and

(b) Distribution of payments over the designated beneficiary’s lifetime or over a period not exceeding the designated beneficiary’s life expectancy.

(A) The beneficiary’s life expectancy is calculated using the age of the beneficiary in the year following the year of the participant’s death, reduced by one for each subsequent year.

(B) If the participant has more than one designated beneficiary as of December 31 of the calendar year following the year of the participant’s death and the account has not been divided into separate accounts for each beneficiary, the beneficiary with the shortest life expectancy is treated as the designated beneficiary.

(9) Required commencement date for a spousal beneficiary. If distributions have not begun before the participant’s death and if the sole designated beneficiary is the participant’s surviving spouse, distributions to the surviving spouse must commence on or before the later of the dates set forth in subsections (a) and (b) below:

(a) December 31 of the calendar year immediately following the calendar year in which the participant died; or

(b) December 31 of the calendar year in which the participant would have attained 70-1/2 years of age.

(c) The distribution period during the surviving spouse’s life is the spouse’s single life expectancy.

(10)(a) Required commencement date for a surviving spouse’s beneficiary. If the surviving spouse dies after the participant’s death but before distributions to the spouse have begun, any death benefits payable to the surviving spouse’s beneficiary will be applied as if the surviving spouse were the participant. The date of death of the surviving spouse will be substituted for the date of death of the participant.

(b) A death benefit payable to the surviving spouse of the deceased participant’s surviving spouse shall be distributed as provided in section (8) of this rule. The provisions of section (9) of this rule do not apply to a death benefit payable to a surviving spouse of the deceased participant’s surviving spouse.

(11)(a) Required commencement date if no designated beneficiary: If a participant dies before the required beginning date with no designated beneficiary as defined in paragraph (1)(c)(C) of this rule, the total account balance must be distributed as provided for in OAR 459-050-0060, by December 31 of the calendar year containing the fifth anniversary of the participant’s or alternate payee’s death.

(b) If a participant dies after the required beginning date with no designated beneficiary as defined in paragraph (1)(c)(C) of this rule, the applicable distribution period must not be longer than the participant’s life expectancy.

(12) Determining the designated beneficiary. The designated beneficiary will be determined based on the beneficiary(s) designated as of December 31 of the calendar year following the calendar year of the participant’s, alternate payee’s, or surviving beneficiary’s death.

(a) A participant may change beneficiaries after his or her required beginning date.

(b) A beneficiary may be changed after a participant’s death, such as by one or more beneficiaries disclaiming benefits.

Stat. Auth: ORS 243.470

Stats. Implemented: ORS 243.401 - 243.507

Hist.: PERS 6-2002, f. & cert. ef. 5-24-02; PERS 6-2011, f. & cert. ef. 8-4-11

Notes
1.) This online version of the OREGON BULLETIN is provided for convenience of reference and enhanced access. The official, record copy of this publication is contained in the original Administrative Orders and Rulemaking Notices filed with the Secretary of State, Archives Division. Discrepancies, if any, are satisfied in favor of the original versions. Use the OAR Revision Cumulative Index found in the Oregon Bulletin to access a numerical list of rulemaking actions after November 15, 2010.

2.) Copyright 2011 Oregon Secretary of State: Terms and Conditions of Use

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