WSR 02-01-121

PERMANENT RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed December 19, 2001, 8:38 a.m. , effective January 1, 2002 ]

Date of Adoption: December 18, 2001.

Purpose: Make changes to deferred compensation under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Some housekeeping changes are also being made, such as putting all definitions into one WAC section.

Citation of Existing Rules Affected by this Order: Repealing WAC 415-501-120, 415-501-130, 415-501-140, 415-501-150, 415-501-160, 415-501-170, 415-501-180, 415-501-190, 415-501-200, 415-501-210, 415-501-300, 415-501-490 and 415-501-500; and amending WAC 415-501-010, 415-501-110, 415-501-380, 415-501-415, 415-501-420, 415-501-430, 415-501-470, 415-501-485, 415-501-486, 415-501-487, 415-501-495, 415-501-530, and 415-501-600.

Statutory Authority for Adoption: RCW 41.50.050(5).

Other Authority: RCW 41.50.030(2), 41.50.088(2), 41.50.770, and 41.50.780, 26 U.S.C. (Internal Revenue Code) and related tax regulations.

Adopted under notice filed as WSR 01-21-132 on October 24, 2001.

Changes Other than Editing from Proposed to Adopted Version: WAC 415-501-494 edited to default to guardianships, rather than custodianships; WAC 415-501-305 is NOT being repealed.

Number of Sections Adopted in Order to Comply with Federal Statute: New 6, Amended 13, Repealed 13; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 6, Amended 13, Repealed 13.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0.

Other Findings Required by Other Provisions of Law as Precondition to Adoption or Effectiveness of Rule: These rules must go into effect on January 1, 2002, to comply with changes in federal tax law.
Effective Date of Rule: January 1, 2002.

December 18, 2001

John Charles

Director

OTS-5295.3

DEFERRED COMPENSATION PLAN ESTABLISHED
AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-010   Deferred compensation plan established.   In accordance with the provisions of RCW 41.50.030(2), 41.50.088(2), 41.50.770, and 41.50.780, and as provided in Section 457 of the Internal Revenue Code, the state of Washington hereby establishes the deferred compensation plan for employees of the state of Washington and approved political subdivisions of the state of Washington, hereinafter referred to as the "plan." Nothing contained in this plan shall be deemed to constitute an employment agreement between the participant and the employer and nothing contained herein shall be deemed to give a participant any right to be retained in the employ of the employer.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, 415-501-010, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-501-010, filed 7/29/96, effective 7/29/96.]


AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-110   Definitions.   (1) Accumulated deferrals. (("Accumulated deferrals" means)) Compensation deferred under the plan, adjusted by income received, increases or decreases in investment value, fees, and any prior distributions made.

(2) Beneficiary. A beneficiary of a participant, a participant's estate, or any other person whose interest in the plan is derived from the participant.

(3) Compensation. All payments made to a public employee by the employer as remuneration for services rendered.

(4) Deferred compensation. The amount of the participant's compensation which the participant and the employer shall mutually agree (prior to the date on which such compensation is earned) will be deferred.

(5) Department. The department of retirement systems created by RCW 41.50.020.

(6) Eligible employee. Any person who is employed by and receives any type of compensation from the employer for whom services are provided, and who is a full-time, permanent part-time working half-time, or more, or career seasonal employee of the employer, whether or not covered by civil service; an elected or appointed official of the executive branch of the government, including any full-time member of a board, commission, or committee; a justice of the supreme court, or a judge of the court of appeals or of a superior court; or a member of the state legislature.

(7) Eligible rollover distribution. A distribution to a participant of any or all funds from an eligible retirement plan unless it is:

(a) One in a series of substantially equal annuity payments;

(b) One in a series of substantially equal installment payments payable over ten years or more;

(c) Required to meet minimum distribution requirements of the plan; or

(d) Distributed for hardship or unforeseeable emergency from a 457 plan.

(8) Employee retirement benefits board. The board created by RCW 41.50.086.

(9) Employer.

(a) The state of Washington; and

(b) Approved political subdivisions of the state of Washington.

(10) Normal retirement age. The range of ages between:

(a) The earliest age at which an eligible participant has the right to receive retirement benefits without actuarial adjustment under any employer-authorized plan; and

(b) Age seventy and one-half.

(11) Participant. An eligible employee who has submitted a participation agreement that is approved by DRS.

(12) Participation agreement. The agreement executed by an eligible employee pursuant to WAC 415-501-410, in which the eligible employee chooses to become a plan participant.

(13) Severance of employment. Termination of employment with an employer.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-110, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-504-010, filed 7/29/96, effective 7/29/96.]


AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-380   Department may require court order.   The department or the employer, if in doubt concerning the correctness of their action in making a distribution of accumulated deferrals, may suspend distribution until satisfied as to the correctness of the distribution or the person to receive the distribution or to allow the filing in any state court of competent jurisdiction of a civil action seeking a determination of the amounts to be paid and the persons to receive them. The department and the employer shall comply with the final orders of the court in any such suit; and the participant, for the participant and the participant's beneficiary or beneficiaries, consents to be bound thereby. Whenever distribution of accumulated deferrals is suspended pursuant to this section, the time for a participant or beneficiary making any ((election under WAC 415-501-490)) choice under WAC 415-501-485 or 415-501-491 through 415-501-494 shall not begin until amount(s) and person(s) entitled are determined either by a written agreement of all parties concerned or by a court judgment that has become final.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-380, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-564-050, filed 7/29/96, effective 7/29/96.]


AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-415   ((Plan to plan transfers.)) Transfers into plan from eligible retirement plans.   ((The only transfers allowable under Section 457 of the Internal Revenue Code are from one eligible Section 457 plan to another eligible Section 457 plan.

(1) Transfers into the plan following a change in employment. If a participant was formerly a participant in an eligible deferred compensation plan (within the meaning of Section 457 of the Internal Revenue Code and its regulations), which permits the direct transfer of the participant's interest to another plan, then this plan shall accept assets representing the value of such interest. However, the department may require in its sole discretion that some or all of such interest be transferred in cash or its equivalent. Such amount shall be held, accounted for, administered, and otherwise treated in the same manner as compensation deferred by the participant under this plan. Only the amount, if any, transferred to the plan which was deferred under the transferor plan in the taxable year when transfer occurs shall be treated as compensation deferred under the plan in such year.

Transfer of the participant's interest will not be allowed if the participant has made any irrevocable distribution election, with respect to such interest, under the transferor plan.

(2) Transfers out of the plan following a change in employment.

If a participant, prior to making an irrevocable distribution election under WAC 415-501-409, accepts employment with an employer who offers an eligible Section 457 plan, and the participant becomes a participant in that plan, then accumulated deferrals may, at the election of the participant and after written notice to the department, be transferred to the other plan, provided that plan provides for the acceptance of such transfers.

(3) Transfers by employees of participating political subdivisions. Transfers of funds by an employee of a participating political subdivision are allowed to and from other Section 457 plans of the Internal Revenue Code maintained by the political subdivision, but only if the other plan also allows the proposed transfer and the participant has not made an irrevocable distribution election relating to either plan.

(4) Application for transfer. If the conditions in subsection (1), (2), or (3) of this section are met and the participant wishes to transfer his/her account, the participant shall complete the appropriate form and/or other documents as may be required by the department.)) (1) Ability to transfer in. A participant may transfer pretax contributions into the department's deferred compensation plan:

(a) Through a direct transfer of an eligible rollover distribution from an individual retirement account (IRA) or from a former employer's retirement plan; or

(b) Through a direct transfer from another 457 plan maintained by a participating political subdivision while the participant remains employed by the political subdivision.

(2) Distributions from the plan attributable to amounts transferred into the plan from non-457 plans may be subject to an additional 10% tax on early distributions. The department will keep a separate accounting of funds rolled into the plan from non-457 eligible retirement plans for this purpose.

(3) Rollover application. To transfer money into a deferred compensation account, a participant must complete the appropriate form. Forms are available through the department or on its website (http://www.wa.gov/drs/dcp/).

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-415, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050. 98-20-047, 415-512-015, filed 9/30/98, effective 10/31/98. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-512-015, filed 7/29/96, effective 7/29/96.]


NEW SECTION
WAC 415-501-416   Transfers from plan into other eligible retirement plans.   (1) Ability to transfer out. Subject to the rules of the receiving plan, a participant may transfer funds from the department's deferred compensation plan:

(a) Through a rollover of an eligible rollover distribution into an individual retirement account (IRA) or another employer-sponsored retirement plan after separation from service;

(b) Through a direct transfer into another IRC section 457 plan after the participant severs employment;

(c) Through a direct transfer into another 457 plan maintained by a participating political subdivision made while the participant remains employed by the political subdivision; or

(d) To purchase eligible service credit under WAC 415-501-417.

(2) Ability of surviving spouse to transfer out. As a beneficiary, the surviving spouse of a participant may transfer eligible rollover distributions from the participant's account into his or her own eligible retirement plan.

(3) Funds that are transferred into a non-457 plan will be governed by the rules of the receiving plan.

(4) Rollover application. To transfer money from a deferred compensation account, a participant or the surviving spouse of a participant must complete the appropriate form. Forms are available through the department or on its website (http://www.wa.gov/drs/dcp/).

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NEW SECTION
WAC 415-501-417   Using deferred compensation funds to purchase service credit.   (1) What is allowed. Subject to the requirements of the receiving retirement plan, a participant may make a direct transfer of funds from his or her deferred compensation account to purchase, restore, or reinstate eligible service credit in any government retirement plan.

(2) Who is eligible. Any plan participant may transfer funds, whether or not employed at the time of the transfer.

(3) How to request a transfer.

(a) A participant may request a transfer by submitting a completed form to the department.

(b) Forms are available through DRS or on its website (http://www.wa.gov/drs/dcp/).

(4) Tax consequences. Participants are advised to consult with a tax professional regarding the tax consequences of this transaction.

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AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-420   Annual deferral limits.   (((1) Except as provided in WAC 415-501-430, relating to catch-up, the maximum that may be deferred under the plan for any taxable year of a participant shall not exceed the lesser of eight thousand dollars, adjusted for the calendar year to reflect cost-of-living increases in accordance with Sections 457 (e)(15) and 415(d) of the Internal Revenue Code (dollar deferral limit) or thirty-three and one-third percent of the participant's includible compensation, each reduced:

(a) By any amount excludable from the participant's gross income for that taxable year under Section 403(b) of the Internal Revenue Code; and

(b) By any amount:

(i) Excluded from gross income under Section 402 (e)(3) or 402 (h)(1)(B) of the Internal Revenue Code (relating to a participant's elective deferrals to simplified employee pensions) for that taxable year;

(ii) For which a deduction is allowable for that taxable year by reason of a contribution to an organization described in Section 501 (c)(18) of the Internal Revenue Code (relating to pension trusts created before June 25, 1959, forming part of a plan for payment of benefits under a pension plan funded only by contributions of employees); or

(iii) Which is deferred by a participant under Section 401(k) of the Internal Revenue Code (relating to qualified cash or deferred arrangement) during that taxable year; and

(c) By any amount the participant contributes to any other Section 457 of the Internal Revenue Code plan (relating to deferred compensation plan(s)) during the taxable year.

(2) "Includible compensation" for purposes of this section means includible compensation as defined in Section 457 (e)(5) of the Internal Revenue Code and as further defined by Treasury Department Regulation 1.457-2 (e)(2) interpreting that section, and is determined without regard to community property laws. Includible compensation for a taxable year includes only compensation from the employer that is attributable to services performed for the employer and that is includible in the participant's gross income for the taxable year for federal income tax purposes. Accordingly, a participant's includible compensation for a taxable year does not include an amount payable by the employer that is excludable from the employee's gross income under:

(a) Section 457 of the Internal Revenue Code;

(b) Section 403(b) of the Internal Revenue Code (relating to annuity contracts purchased by Section 501 (c)(3) of the Internal Revenue Code organizations or public schools);

(c) Section 105(d) of the Internal Revenue Code (relating to wage continuation plans);

(d) Section 911 of the Internal Revenue Code (relating to citizens or residents of the United States living abroad);

(e) Section 402 (e)(3) or 402 (h)(1)(B) or 402(k) of the Internal Revenue Code (relating to simplified employee pensions);

(f) Section 501 (c)(18) of the Internal Revenue Code (relating to certain pension trusts); or

(g) Section 401(k) of the Internal Revenue Code (relating to qualified cash or deferred arrangements).

(3) In computing includible compensation, total gross compensation as shown on earnings statements must be reduced by:

(a) Section 414(h) of the Internal Revenue Code, before tax contributions to retirement plans (including those described in RCW 41.04.440, 41.04.445, and 41.04.450); and

(b) Any Section 125 of the Internal Revenue Code contributions to cafeteria plans (including those which include such items as dependent care salary reduction plans) before excluding the items listed in subsection (2)(a) through (g) of this section.)) (1) Except as provided in WAC 415-501-430 (catch-up provisions), the maximum that a participant may defer under the plan for any taxable year shall not exceed the lesser of:

(a) One hundred percent of the participant's includible compensation; or

(b) The annual deferral amount in the following table:


For taxable year beginning in calendar year: Annual deferral amount:
2001 $8,500
2002 $11,000
2003 $12,000
2004 $13,000
2005 $14,000
2006 $15,000
Beginning January 1, 2007 $15,000
plus cost-of-living adjustments, if any, established by the IRS under 26 USC 457

(2) "Includible compensation" for purposes of this section means includible compensation as defined in IRC Section 457 (e)(5), and as further defined by Treasury Department Regulation 1.457-2 (e)(2) interpreting that section, and is determined without regard to community property laws.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-420, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050. 98-20-047, 415-512-020, filed 9/30/98, effective 10/31/98. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-512-020, filed 7/29/96, effective 7/29/96.]


AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-430   "Catch-up" provisions.   ((For one or more of the participant's last three taxable years ending before attaining normal retirement age under the plan, the maximum deferral shall be the lesser of:

(1) Fifteen thousand dollars for the taxable year, reduced in the same manner as the dollar deferral limit is reduced in WAC 415-501-420; or

(2) The sum of:

(a) The limits established for purposes of WAC 415-501-420 of the plan for the taxable year (determined without regard to this section), plus

(b) So much of the limit established under WAC 415-501-420 for taxable years before the taxable year as has not theretofore been used under WAC 415-501-420 or 415-501-430. A prior taxable year shall be taken into account only if:

(i) It begins after December 31, 1978;

(ii) The participant was eligible to participate in the plan during all or any portion of the taxable year, and;

(iii) Compensation deferred (if any) under the plan during the taxable year was subject to a maximum limit (as established under WAC 415-501-420).

A prior taxable year includes a taxable year in which the participant was eligible to participate in an eligible plan sponsored by another entity. In no event can the participant elect to have the catch-up provision apply more than once whether or not the full catch-up had been utilized.

"Normal retirement age," as used in chapter 415-501 WAC, means the range of ages:

Ending not later than age seventy and one-half; and

Beginning not earlier than the earliest age at which the participant has the right to retire under an employer authorized pension for which the participant is eligible and under which the participant will receive immediate retirement benefits without actuarial adjustment due to retirement prior to some later specified age in an employer authorized pension plan.

This catch-up provision may not be used in the year in which the participant attains age seventy and one-half, and may not be used in any year thereafter.)) Two "catch-up" options allow a participant to defer more than the annual deferral limit set forth in WAC 415-501-420. A participant may not use both catch-up provisions during the same taxable year.

(1) Age fifty and over: A participant may defer a higher amount during any plan year in which the participant is age fifty or older. The maximum a participant may defer each year shall be the sum of:

(a) The annual deferral amount in WAC 415-501-420 for the current taxable year; and

(b) The lesser of:

(i) Compensation available for deferral; or

(ii) The amount in the following table:


For taxable year beginning in calendar year: Annual deferral amount:
2002 $1,000
2003 $2,000
2004 $3,000
2005 $4,000
2006 $5,000
Beginning January 1, 2007 $5,000
plus cost-of-living adjustments, if any, established by the IRS under 26 USC 414

(2) Three years before normal retirement age: A participant may defer a higher amount during a period of three consecutive years immediately preceding any taxable year the participant reaches normal retirement age as defined in WAC 415-501-110(10). The maximum a participant may defer during each of the three years shall be the lesser of:

(a) Twice the annual deferral amount under WAC 415-501-420(1); or

(b) The sum of:

(i) The annual deferral amount in WAC 415-501-420(1); plus

(ii) The portion of the participant's annual deferral amount for any prior taxable year that the participant has not previously used under WAC 415-501-420 or this subsection.

(3) For purposes of subsection (2)(b)(ii) of this section, a prior taxable year shall be taken into account only if:

(a) It begins after December 31, 1978;

(b) The participant was eligible to participate in the plan during any portion of the taxable year, or eligible to participate in an eligible 457 plan sponsored by another entity; and

(c) Compensation deferred under the plan during the taxable year (if any) was subject to a deferral limit under WAC 415-501-420.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-430, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050. 98-20-047, 415-512-030, filed 9/30/98, effective 10/31/98. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-512-030, filed 7/29/96, effective 7/29/96.]


AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-470   Suspension and reinstatement of deferrals.   Suspension. A participant may at any time, through the methods established by the department, direct that his((/)) or her deferrals cease. The direction to cease deferrals must be provided to the department or its designee no later than the last day of the month prior to the month during which the deferrals are to cease; however, accumulated deferrals shall be paid only as provided in ((WAC 415-501-480 through 415-501-500)) this chapter.

Reinstatement. A participant may reinstate deferrals at any time, except after having ceased deferrals as part of an unforeseeable emergency distribution request. A participant who has directed the cessation of deferrals as part of an unforeseeable emergency distribution request cannot resume deferrals sooner than six months after his((/)) or her deferrals ceased. Deferrals will begin the month immediately following the month that the resumption of deferrals is requested.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-470, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050. 98-20-047, 415-512-070, filed 9/30/98, effective 10/31/98. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-512-070, filed 7/29/96, effective 7/29/96.]


AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-485   Distribution to participant ((after separation from service)).   ((After separation from service, the participant shall be paid his/her accumulated deferrals in one or more installments as elected by the participant pursuant to WAC 415-501-490.)) Distribution from the plan is governed by IRC Sections 401 (a)(9) and 457(d), and these rules to the extent they are not inconsistent with the Internal Revenue Code. The options for distribution are set forth in the DCP Distribution Booklet. The booklet will be mailed to the participant upon notification from the employer of severance from service.

(1) Date of distribution. A participant may choose the date on which to begin distribution from his or her deferred compensation account, subject to the requirements in (a) through (c) of this subsection. The department must receive the election form at least thirty days prior to the date distribution is to begin.

(a) Earliest date. Distribution to a participant may not begin prior to the participant's severance from employment with the following three exceptions:

(i) A distribution for an unforeseeable emergency under WAC 415-501-510;

(ii) A voluntary in-service distribution under subsection (4) of this section; or

(iii) A distribution from non-457 funds that were rolled into the deferred compensation account.

(b) Latest date. Distribution to a participant must begin on or before April 1st of the calendar year following the latter of:

(i) The calendar year in which the participant reaches age seventy and one-half; or

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

(c) If a participant does not make a timely choice of distribution date, the department will begin distribution in accordance with the minimum distribution requirements in IRC Section 401 (a)(9).

(2) Method of distribution. The participant may choose a distribution method (amount and frequency) from the payment options outlined in the DCP Distribution Booklet. Payment options include a lump sum payment, periodic payments, or an annuity purchase.

(a) Periodic payments must be at least fifty dollars per month (if paid monthly) or six hundred dollars per year.

(b) Beginning at age seventy and one-half, payment must be in an amount to satisfy minimum distribution requirements in IRC Section 401 (a)(9).

(3) If the participant is rehired and reenrolls in the department's deferred compensation plan, the department will stop distribution to the participant and/or void any choices of distribution date and method made prior to reenrollment.

(4) Voluntary in-service distribution. An active participant may choose to receive an in-service distribution of the total amount payable to the participant under the plan if the following requirements are met:

(a) The total amount payable to the participant does not exceed five thousand dollars;

(b) The participant has not previously received an in-service distribution; and

(c) The participant's deferrals have been suspended during the preceding two-year period ending on the date of the in-service distribution.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-485, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-512-085, filed 7/29/96, effective 7/29/96.]


AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-486   Distribution in the event of participant's death ((of participant)).   ((Should the participant die at any time, whether before or after separation from service, accumulated deferrals shall be paid to the beneficiary or beneficiaries designated by the participant pursuant to WAC 415-501-480. The accumulated deferrals shall be paid out as provided in WAC 415-501-480 through 415-501-500. If no beneficiary is designated, or if the designated beneficiary does not survive the participant by a period of thirty days, then a lump sum or series of distributions shall be paid, in accordance with WAC 415-501-480 through 415-501-500, to the surviving spouse, or if none, a lump sum shall be paid to the estate of the participant.)) If the participant dies before the entire deferred compensation account has been distributed, accumulated deferrals shall be paid to the beneficiary or beneficiaries designated by the participant pursuant to WAC 415-501-480. If no beneficiary is designated or if the designated beneficiary does not survive the participant by a period of thirty days, then accumulated deferrals shall be paid to the participant's surviving spouse, if any. If the participant has no surviving spouse, accumulated deferrals shall be paid to the participant's estate. Provisions regarding distribution to various classes of beneficiaries are set forth in WAC 415-501-491 through 415-501-494.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-486, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-512-086, filed 7/29/96, effective 7/29/96.]


AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-487   Distribution in the event of beneficiary's death ((of beneficiary)).   ((In the event a beneficiary survives the participant by thirty days and becomes entitled to receive accumulated deferrals, accumulated deferrals shall become payable to the beneficiary's estate in the second month following the beneficiary's death, unless benefits are being paid in the form of an annuity, in which case the disposition of the remaining amount shall be determined by the annuity contract. Such annuity contracts shall be issued pursuant to the rules set forth in WAC 415-501-500.)) If a beneficiary becomes entitled to receive accumulated contributions under WAC 415-501-486 but dies before the participant's account is fully distributed, accumulated deferrals shall become payable to the beneficiary's estate in the second month following the notification of the beneficiary's death, unless benefits are being paid under an annuity purchased by the participant. If benefits were being paid under an annuity, distribution shall be governed by the terms of the annuity contract.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-487, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-512-087, filed 7/29/96, effective 7/29/96.]


NEW SECTION
WAC 415-501-491   Distribution to a beneficiary, if distribution to the participant has previously begun.   If a participant dies after distribution has begun but before the entire account has been exhausted, the participant's beneficiary(ies) must receive distribution at least as rapidly as was being paid to the participant. The options for distribution are set forth in the department's DCP Distribution Booklet. The booklet will be mailed to beneficiaries upon the notification of the death of a participant.

(1) Date of distribution. A beneficiary must choose a distribution date that is not less than ninety days from the date the department receives notification of the participant's death.

(2) Method of distribution. Subject to the requirements of (a) through (d) of this subsection, the beneficiary may choose a distribution method (amount and frequency) from the payment options outlined in the DCP Distribution Booklet. Payment options include a lump sum payment or periodic payments.

(a) The beneficiary must choose an amount and frequency that allows for distribution of the entire DCP account during the beneficiary's projected life expectancy.

(b) Distribution must continue in an amount that is at least equivalent to the amount previously received by the participant.

(c) Periodic payments must be at least fifty dollars per month (if paid monthly) or six hundred dollars per year.

(d) Life expectancies will be computed by the Department of the Treasury and set forth in IRS Regulation 1.72-9.

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NEW SECTION
WAC 415-501-492   Distribution to a beneficiary, if distribution to the participant has not begun.   If a participant dies before distribution has begun, the participant's beneficiaries will receive payment of the account according to the provisions of this section. The options for distribution are set forth in the DCP Distribution Booklet. The booklet will be mailed to beneficiaries upon the notification of death of a participant.

(1) Date of distribution. Subject to the requirements of this subsection, a beneficiary may choose the date on which to begin distribution from the participant's DCP account. The department must receive the election form at least thirty days prior to the date distribution is to begin.

(a) Distribution to a beneficiary must begin on or before April 1st of the calendar year following the latter of:

(i) The calendar year in which the participant would have reached age seventy and one-half; or

(ii) The calendar year in which the participant dies.

(b) The choice of distribution date may be further limited as set forth in subsection (2)(c) of this section. If a beneficiary does not make a timely choice of distribution date, the department will begin distribution in accordance with the minimum distribution requirements in IRC 401 (a)(9).

(2) Method of distribution. Subject to the requirements in subsection (1) of this section, beneficiaries may choose the following methods to receive distribution.

(a) Spouse as beneficiary. A spouse-beneficiary may choose to receive distribution over his or her projected life expectancy. Distributions must begin not later than:

(i) December 31st of the year following the year of the participant's death; or

(ii) December 31st of the year following the year the participant would have reached age seventy and one-half.

(b) Nonspouse as beneficiary. A nonspouse-beneficiary may choose to receive distribution over his or her lifetime, if the distributions begin not later than December 31st of the year following the year of the participant's death.

(c) Five-year rule. If a beneficiary does not begin distribution within the requirements of (a) or (b) of this subsection, distribution of the entire account must be completed within five years of the participant's death.

(d) Regardless of the method of distribution chosen, periodic distributions made by the department must be at least fifty dollars per month (if paid monthly) or six hundred dollars per year.

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NEW SECTION
WAC 415-501-493   Distribution to an organization, estate, or trust as beneficiary.   If the participant's beneficiary is an organization, estate, or trust, the department will make the distribution as a lump sum in the second month following the notification of the participant's death.

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NEW SECTION
WAC 415-501-494   Distribution to minor beneficiaries.   (1) The department will distribute deferred compensation funds on behalf of a minor beneficiary only if it receives proof that the minor has either a court-appointed guardian or a custodian designated in compliance with RCW 11.114.030.

(2) If the department does not receive the proof in subsection (1) of this section, or if the guardian or custodian is unable or unwilling to serve, the department will request a court of competent jurisdiction to establish a guardianship under chapters 11.88 and 11.92 RCW. The department will make this request no sooner than one hundred eighty days after notification of the participant's death, regardless of the amount at issue.

(3) After a guardianship or custodianship has been established, either by prior designation or by court order, the department will transfer the deferred compensation funds to the named guardian or custodian.

(4) If a participant has more than one minor beneficiary, a separate custodianship must be established for each minor. Each minor's interest must be determined in accordance with the governing instrument and applicable law. Only one person may be the custodian for each minor.

(5) Written confirmation from the guardian or custodian that the funds have been delivered discharges the department from further liability for the deferred compensation funds transferred to the guardian or custodian on behalf of the minor.

(6) The custodian may choose a deferred compensation distribution date and method on behalf of the minor, consistent with the requirements of this chapter.

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AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-495   Domestic relations orders.   ((Domestic relations orders establish a right of the (ex) spouse to a portion of a participant's account after the participant separates from service.

(1) Order requirements. The department may, at its discretion, honor a court ordered or court approved decree of dissolution, decree of legal separation, or property settlement agreement incident to a court decree of dissolution or legal separation. In order for the department to honor the court ordered or court approved document, it must:

(a) Direct disbursement to (ex) spouse as a specified portion of the proceeds expressed as a current dollar amount or as a percentage of the value of the participant's deferred compensation account as of a specific date; and

(b) Require the participant to begin receiving distribution of proceeds from the plan not later than the April 1st immediately following the close of the year in which the participant separates from service; and

(c) Specify whether or not the participant, if he/she goes to work for another employer who offers an eligible Section 457 plan, shall have the right to transfer funds to the employer's Section 457 plan; and

(d) Be from a court of competent jurisdiction, be certified, and be personally served upon the department in a manner provided by the civil rules of superior court or applicable statute; and

(e) Provide a limitation, expressed as a cumulative dollar amount, above which the participant may not request and receive hardship withdrawals.

(2) A separate account for the (ex) spouse will be established for an order that is in compliance with subsection (1) of this section and honored by the department. Such an account will be established with the amount specified in subsection (1)(a) of this section.

(3) Distribution. If a participant has separated from service and makes an irrevocable distribution date election, distribution to the (ex) spouse will be made when distribution begins to the participant. The (ex) spouse may choose the method of distribution as provided in WAC 415-501-500.

(4) The department cannot honor an order directing immediate distribution into court, or to the spouse of an employee-participant.)) (1) The department will honor certain domestic relations orders (DRO) entered by a court of competent jurisdiction.

(2) The department will honor a DRO only if it:

(a) Establishes a right of a spouse or former spouse to a portion of a participant's deferred compensation account pursuant to a division of property;

(b) Clearly states either the dollar amount or a percentage of the account on a specific date to be transferred to the account of the spouse or former spouse from the participant's account; and

(c) Provides the name, address, date of birth, and Social Security number of the participant and the spouse or former spouse.

(3) To implement a DRO, the department will establish a separate account for the spouse or former spouse in the amount specified in subsection (2)(b) of this section. The amount will initially be invested in the savings pool. Thereafter, the spouse or former spouse may provide investment instructions under WAC 415-501-450.

(4) The participant's spouse or former spouse may choose a method of distribution, including a direct rollover.

(5) If a DRO filed with the department prior to January 1, 2002, provides that distribution to the former spouse is not available until the participant separates from service, the department will comply with the express terms of the order unless it is subsequently amended.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-495, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050. 98-20-047, 415-512-095, filed 9/30/98, effective 10/31/98.]


AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-530   Termination of plan.   The employer or the department may at any time terminate this plan. Upon such termination, accumulated deferrals will be paid pursuant to ((WAC 415-501-410 through 415-501-500 of the plan)) this chapter. The participants' deferrals will cease.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-530, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-532-010, filed 7/29/96, effective 7/29/96.]


AMENDATORY SECTION(Amending WSR 00-11-104, filed 5/18/00, effective 6/18/00)

WAC 415-501-600   Employer contributions.   The employer may, pursuant to WAC 415-501-450 or 415-501-470, add additional deferred compensation for services to be rendered by the employee to the employer during any calendar month, provided:

(1) The employee has elected to have such additional compensation deferred, invested, and distributed, pursuant to this plan, prior to the calendar month in which the compensation is earned; and

(2) Such additional deferred compensation, when added to all other deferred compensation under the plan, does not exceed the maximum deferral permitted by ((WAC 415-501-410 through 415-501-500)) this chapter.

[Statutory Authority: RCW 41.50.770, [41.50.]780 and 41.50.050. 00-11-104, amended and recodified as 415-501-600, filed 5/18/00, effective 6/18/00. Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-556-010, filed 7/29/96, effective 7/29/96.]


REPEALER

     The following sections of the Washington Administrative Code are repealed:
WAC 415-501-120 Beneficiary.
WAC 415-501-130 Compensation.
WAC 415-501-140 Deferred compensation.
WAC 415-501-150 Department.
WAC 415-501-160 Eligible employee.
WAC 415-501-170 Employee retirement benefits board.
WAC 415-501-180 Employer.
WAC 415-501-190 Participant.
WAC 415-501-200 Participation agreement.
WAC 415-501-210 Separation from service.
WAC 415-501-300 Department to adopt rules and regulations.
WAC 415-501-490 Elections regarding distribution.
WAC 415-501-500 Distribution of deferrals.

Washington State Code Reviser's Office