[Filed December 23, 1996, 11:59 a.m.]
Preproposal statement of inquiry was filed as WSR 96-22-051.
Title of Rule: Offering additional elections to participants regarding distribution of account assets.
Purpose: To accommodate recent changes in federal law allowing postponement of election to receive a distribution.
Statutory Authority for Adoption: RCW 41.50.780(11), 41.50.050.
Statute Being Implemented: RCW 41.50.770.
Summary: Modification of WAC 415-512-090 to implement change in IRC section 457 (effective January 1, 1997) which will allow deferred compensation plan participants to elect to postpone what has previously been an irrevocable date to begin payout.
Reasons Supporting Proposal: To allow participants to take advantage of new, liberalized postponement of payout provision at earliest possible time. The change is of significant benefit to numerous participants. Because the change offers additional options without taking away any currently available, no one is adversely affected by the change.
Name of Agency Personnel Responsible for Drafting: Paul Neal, 1025 East Union Avenue, Olympia, WA, (360) 709-4747; Implementation and Enforcement: Lee Dreisbach, P.O. Box 40931, Olympia, WA 98504-0931, (360) 586-4985.
Name of Proponent: Department of Retirement Systems, governmental.
Rule is not necessitated by federal law, federal or state court decision.
Explanation of Rule, its Purpose, and Anticipated Effects: Modification of WAC 415-512-090 to implement change in IRC section 457 (effective January 1, 1997) which will allow deferred compensation plan participants to elect to postpone what has previously been an irrevocable date to begin payout. The anticipated effect is to allow participants more flexibility in selecting their payout options.
Proposal Changes the Following Existing Rules: The rule amends WAC 415-512-090 to allow plan participants to postpone receipt of their account assets.
No small business economic impact statement has been prepared under chapter 19.85 RCW. The rules apply to public employers and employees participating in the retirement systems administered by the Department of Retirement Systems. No private businesses are affected by the rules, therefore, no small business impact statement is required.
Section 201, chapter 403, Laws of 1995, does not apply to this rule adoption. The Department of Retirement Systems is not one of the agencies that this provision applies to. The Department of Retirement Systems does not opt to voluntarily bring itself within the coverage of those rules.
Hearing Location: Boardroom, 2nd Floor, 1025 East Union Avenue, Olympia, WA 98504-8380, on February 4, 1997, at 11:00 a.m.
Assistance for Persons with Disabilities: Contact Paul Neal by January 31, 1997, TDD (360) 586-5450, or (360) 586-3368.
Submit Written Comments to: Paul Neal, P.O. Box 48380, Olympia, WA 98504-8380, FAX (360) 709-4747.
Date of Intended Adoption: February 6, 1997.
December 23, 1996
AMENDATORY SECTION (Amending WSR 96-16-020, filed 7/29/96, effective
WAC 415-512-090 Elections regarding distribution. Each participant (or in the event of death, each beneficiary other than an organization, an estate, or a trust) shall elect when his/her payout will begin and the payout period.
(1) Election regarding time of payment. The election regarding the
time)) date when payment will begin shall be made when a participant
separates from service (or dies having separated from service and having
previously elected when payment will begin).
Once made, the election regarding when payout will begin is irrevocable as to the participant or beneficiary making the election, unless the participant or beneficiary, more than thirty days prior to the elected date payment is to begin, elects to postpone the original date. Only one such postponement is allowed. The election regarding when payment will begin:
(a) By a participant who separates from service other than by reason of death, must be made not later than sixty days after separation from service. Payment may begin on the central payroll date nearest the twenty-fifth day of the month following the month in which an election is filed with the department on forms provided for that purpose, and payment must begin within the time prescribed by WAC 415-512-110;
(b) By a beneficiary, other than an organization, estate or trust, where the participant was not already receiving payments, must be made not later than sixty days after the participant's death. Payment may begin on the central payroll date nearest the twenty-fifth day of the month following the month in which an election is filed with the department on forms provided for that purpose, and payment must begin within the time prescribed by WAC 415-512-110.
(2) Election regarding method of payment. The participant (or
beneficiary) who makes an election regarding the date payment will begin,
may also elect the period over which payments will be made. The payout
period election may be made either at the time he/she elects a beginning
date for payout or at any time not later than sixty days prior to the
date payout is to begin. Once having made this election, the participant
(or beneficiary, other than an organization, estate, or trust) may change
the payout period election not later than ((
sixty)) thirty days prior to
the date payout is to begin. Such a beneficiary may also make this
election where the participant was already receiving payments but, as
provided in WAC 415-512-110 (3)(a), must receive distribution at least
as rapidly as it was being distributed to the participant. Such a
beneficiary must make the payout period election not later than sixty
days after the death of the participant and payout will be suspended
following the participant's death until the beneficiary either makes a
payout period election or begins receiving payment as provided in
subsection (4) of this section. Provided, if the participant was
receiving payout in the form of an annuity contract, then the successor's
right shall be limited by the terms of that contract.
(3) How elections are made. A participant or beneficiary makes elections allowed under this section by completing and filing applicable payment request forms with the department.
(4) Consequences in absence of a timely election regarding time of payment. Absent a timely election regarding when payout is to begin, payout will begin on the central payroll date nearest the twenty-fifth day of the month following the month in which the election period ends, and will be made, in a lump sum if the accumulated deferrals as of the end of the election period are less than twenty-five thousand dollars or, if the accumulated deferrals are twenty-five thousand dollars or more, in equal monthly installments over a period of one hundred twenty months or such lesser period:
(a) As may be necessary under the minimum payout requirements of Section 457 (d)(2)(B)(i)(I) of the Internal Revenue Code, requiring amounts to be paid not later than as determined under Section 401 (a)(9)(G) of the Internal Revenue Code; or
(b) As may be necessary under Section 457 (d)(2)(B)(i)(II) of the Internal Revenue Code, requiring amounts not distributed to the participant during his/her life to be distributed at least as rapidly as they were being distributed as of the participant's death.
(5) Effects of certain employment changes. Transfers from the plan are allowed in the circumstances described in WAC 415-512-015(2).
(6) Consequences in absence of a timely election regarding method of payment. In the absence of a timely election regarding the period of time over which payment will be made, payment will be made in the manner described in subsection (4) of this section.
(7) Payment to an organization, estate, or trust. Any amount
payable to an organization, estate, or trust shall be paid in a lump sum
as prescribed in WAC 415-512-110(3).
[Statutory Authority: RCW 41.50.050 and 41.50.780(11). 96-16-020, 415-512-090, filed 7/29/96, effective 7/29/96.]