§ 5063a - Compliance with federal law - Vermont Statutes

§ 5063a. Compliance with federal law

(a) Intent. The general assembly intends that the retirement system and any trusts or custodial accounts established to hold the assets of the retirement system in accordance with subsection (b) of this section be maintained, in form and operation, so as to maintain the status of the retirement system as a qualified plan under 26 U.S.C. § 401(a) as amended, and the tax exempt status of such trusts and custodial accounts under 26 U.S.C. § 501(a), to the extent that those requirements apply to a governmental plan as described in 26 U.S.C. § 414. Notwithstanding any other provision of this chapter to the contrary, this section shall be applicable, administered, and interpreted in a manner consistent with maintaining the tax qualification of the retirement system as a qualified plan and the tax exempt status of such trusts and custodial accounts under 26 U.S.C. §§ 401(a) and 501(a), respectively.

(b) Exclusive benefit. All assets of the retirement system shall be held in trust, in one or more custodial accounts treated as trusts in accordance with 26 U.S.C. § 401(f), or in a combination thereof. Under any trust or custodial account, it shall be impossible at any time prior to the satisfaction of all liabilities with respect to members and their beneficiaries for any part of the corpus or income to be used for or diverted to purposes other than the exclusive benefit of members and their beneficiaries. However, this requirement shall not prohibit:

(1) the return of a contribution within six months after the retirement system determines that the contribution was made by a mistake of fact; or

(2) payment of the expenses of the retirement system.

(c) Vesting on plan termination. In the event of the termination of the retirement system, the accrued benefits of eligible members shall become fully and immediately vested.

(d) Forfeitures. Service credits forfeited by a member for any reason shall not be applied to increase the benefits of any other member.

(e) Required distributions. Distributions shall begin to be made not later than the member's required beginning date as defined under 26 U.S.C. § 401(a)(9) and shall be made in accordance with all other requirements of that subsection. Benefits shall be paid under the maximum allowance pursuant to this subsection even though the member has not previously applied to receive them. The system shall be deemed to be in compliance with the terms of 26 U.S.C. § 401(a)(9) so long as it is administered under a reasonable good faith interpretation of that subsection.

(f) Limitation on benefits. Benefits shall not be payable to the extent that they exceed the limitations imposed by 26 U.S.C. § 415, as adjusted for increases in the cost of living.

(g) Limitation on compensation. Benefits and contributions shall not be computed with reference to any compensation that exceeds the maximum dollar amount permitted by 26 U.S.C. § 401(a)(17) as adjusted for increases in the cost of living.

(h) Actuarial determination. Whenever the amount of any member's benefit is to be determined on the basis of actuarial assumptions done by a professional actuary, those assumptions shall be specified by resolution, which documentation shall be incorporated in the system by reference. The board shall also adopt interest and mortality assumptions for the purposes of determining actuarial equivalent benefits under the system. The board shall adopt assumptions by resolution, which documentation shall be incorporated in the system by reference.

(i) Direct rollovers. An individual withdrawing a distribution from the retirement system which constitutes an "eligible rollover distribution" within the meaning of 26 U.S.C. § 402, may elect, in the time and manner prescribed by the retirement board and after receipt of proper notice, to have any portion of the distribution paid directly to another plan that is qualified under 26 U.S.C. § 401(a), to an annuity plan described in 26 U.S.C. § 403(a), to an annuity contract described in 26 U.S.C. § 403(b), or to an eligible plan described in 26 U.S.C. § 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to account separately for amounts transferred into such plan, or to an individual retirement account or annuity described in 26 U.S.C. § 408(a) or (b), in a direct rollover.

(j) Compliance with the Uniformed Services Employment and Reemployment Rights Act (USERRA). Notwithstanding any provision of law to the contrary, contributions, benefits, and service credits with respect to qualified military service shall be provided under the system in accordance with 26 U.S.C. § 414(u), unless state law provides more favorable benefits than those required by federal law.

(k) Mandatory withdrawal. When a member who is not vested in the system is required by this chapter to withdraw his or her assets of greater than $1,000.00 from the system and the member fails to provide distribution directions, the system shall directly roll over those assets into an IRA in the member's name.

( l ) The board may adopt rules to ensure that this chapter complies with federal law requirements. (Added 2007, No. 13, § 46; amended 2009, No. 24, § 12.)