SECTION 715:10-19-8. Distributions

(a)   Distributions from members' accounts must be made in accordance with the Internal Revenue Code. TRS will distinguish pre-'87 and post-'86 account balances. Both account balances will be distributed in accordance with the applicable Internal Revenue Code provisions as they pertain to individual retirement accounts or annuities. The post-'86 account balance will include earnings after 1986 on the pre-'87 account balance. TRS will adjust each balance as required under IRS rules and regulations.

(b)   Distribution of deposits made, or income earned, after December 31, 1988, will not be made to members except under one of the following circumstances:

(1)   Attainment of age fifty-nine and one-half (59 1/2).

(2)   Death.

(3)   Disability within the meaning of section 72(m)(7) of the Internal Revenue Code.

(4)   Severance from employment (with the member's employer). However, a severance from employment also occurs on any date on which a member ceases to be an employee of an educational organization, even though the member may continue to be employed by a related employer that is another unit of the State or local government that is not an educational organization or in a capacity that is not employment with an educational organization (e.g., ceasing to be an employee performing services for an educational organization but continuing to work for the same state or local government employer).

(5)   Retirement.

(6)   Financial hardship (this distribution does not include accumulated earnings).

(7)   Transfer to another section 403(b) plan in accordance with subsection (n) of this section.

(8)   Qualified reservist distribution under Code Section 72(t).

(9)   Pursuant to a qualified domestic relations order.

(c)   Distributions from this tax-sheltered annuity program are subject to federal and state income taxes. Certain distributions may also be subject to penalties and/or excise taxes under the Internal Revenue Code. Members should seek tax advice prior to requesting distributions.

(d)   Upon filing a properly executed distribution request application, a portion or all of a member's tax-sheltered annuity balance that qualifies under Internal Revenue Code regulations, may be distributed. Distributions, other than required minimum distributions and hardship withdrawals, are subject to a mandatory federal withholding of twenty percent (20%). (Distribution of these deposits shall not affect membership status.)

(e)   Members who have attained age fifty-nine and one-half (59 ½) are eligible to withdraw all or any portion of their deposits, subject to the provisions of subsection (h) of this section.

(f)   Members who have not attained age fifty-nine and one-half (59 ½) and who have not had a severance from employment (retired or terminated employment) may withdraw only contributions made prior to January 1, 1989, unless a financial hardship exists. (See OAC 715:10-19-9.) Notwithstanding the foregoing sentence, a member may transfer his or her Program account to another section 403(b) plan subject to and in accordance with subsection (n) of this section. In addition, the restrictions of this section do not apply to amounts held in a separate rollover account.

(g)   Members who roll over their Program accounts to another section 403(b) plan may transfer these funds back to the Program at a later time subject to and in accordance with paragraph 6 of OAC 715:10-19-5.

(h)   Upon severance from employment, a member may elect one of the following annuity distribution options subject to Internal Revenue Code requirements, including Code Section 403(b)(10), Code Section 401(a)(9), and the incidental death benefit requirements of Code Section 401(a):

(1)   Minimum distribution option under Code Section 401(a)(9), with the post-1986 deferrals and all post-1986 earnings subject to the current Internal Revenue Service distribution rules and the pre-1987 account balance subject to the prior applicable Internal Revenue Service distribution rules.

(2)   Lump sum surrender option, payable only to the member.

(3)   Partial lump sum, where the member selects a specified lump sum payable to the member.

(4)   A nontransferable fixed or variable annuity issued by an insurance company providing for periodic payments to a member and his/her beneficiary.

(i)   The beneficiary(ies) designated on a member's regular retirement account also shall serve as beneficiary(ies) for the Program account, unless otherwise designated by the member.

(j)   In the calendar year following the calendar year of the member's death, if the member dies before distribution of the member's account, the member's account shall be paid to his or her designated beneficiary in a lump sum. Alternatively, if the designated beneficiary with respect to the member's account is a natural person, at the designated beneficiary's election, distribution can be made in annual installments with the distribution period determined under this paragraph.

(k)   If the designated beneficiary is the member's surviving spouse, the distribution period is equal to the beneficiary's life expectancy using the single life table in section 1.401(a)(9)-9, A-1, of the Income Tax Regulations for the spouse's age on the spouse's birthday for that year. If the designated beneficiary is not the member's surviving spouse, the distribution period is the beneficiary's life expectancy determined in the year following the year of the member's death using the single life table in section 1.401(a)(9)-9, A-1, of the Income Tax Regulations for the beneficiary's age on the beneficiary's birthday for that year, reduced by one for each year that has elapsed after that year.

(l)   In the event there is no designated beneficiary, or if the member's estate or trust or a charitable organization is the designated beneficiary, the entire account balance must be distributed by the fifth year following the member's death. For any year, a beneficiary can elect distribution of a greater amount (not to exceed the amount of the remaining account balance) in lieu of the amount calculated under this paragraph.

(m)   In no event shall any distribution begin later than the later of (i) April 1 of the year following the calendar year in which the member attains age seventy and one-half (70 ½) or (ii) April 1 of the year following the year in which the member retires or otherwise has a severance from employment. If distributions commence in the calendar year following the later of the calendar year in which the member attains age seventy and one-half (70 ½) or the calendar year in which the severance from employment occurs, the distribution on the date that distribution commences must be equal to the annual installment payment for the year that the member has a severance from employment and an amount equal to the annual installment payment for the year after severance from employment must also be paid before the end of the calendar year of commencement. For purposes of this paragraph, annual installment payments through the year of the member's death are calculated as the amount payable each year equal to a fraction of the member's account balance equal to one divided by the distribution period set forth in the Uniform Lifetime Table at section 1.401(a)(9)-9, A-2, of the Income Tax Regulations for the member's age on the member's birthday for that year. If the member's age is less than age seventy (70), the distribution period is twenty-seven and four-tenths (27.4) plus the number of years that the member's age is less than age seventy (70). At the member's election, this annual payment can be made in monthly or quarterly installments. The account balance for this calculation (other than the final installment payment) is the account balance as of the end of the year prior to the year for which the distribution is being calculated. For any year, the member can elect distribution of a greater amount (not to exceed the amount of the remaining account balance) in lieu of the amount calculated using this formula. Notwithstanding anything to the contrary in this Section, distribution of elective deferrals made prior to January 1, 1987 (but not any interest accumulated with respect thereto) need not commence until April 1 of the calendar year following the calendar year in which the Participant attains age seventy-five (75).

(n)   A plan-to-plan transfer from the Program to another section 403(b) plan may be made on behalf of an active member if the following conditions are satisfied:

(1)   The member is an employee of the employer for the receiving plan;

(2)   The receiving plan provides for the receipt of transfers;

(3)   The member whose assets are being transferred has an accumulated benefit immediately after the transfer that is at least equal to the accumulated benefit of that member immediately before the transfer;

(4)   The receiving plan provides that, to the extent any amount transferred is subject to any distribution restrictions under section 1.403(b)-6 of the Income Tax Regulations, the receiving plan shall impose restrictions on distributions to the member whose assets are being transferred that are not less stringent than those imposed on the Program; and

(5)   If the transfer does not constitute a complete transfer of the member's interest in the Program, the receiving plan shall treat the amount transferred as a continuation of a pro rata portion of the member's interest in the Program.

(o)   Permissive Service Credit Transfers.

(1)   If a member is also a member in a tax-qualified defined benefit governmental plan (as defined in section 414(d) of the Code) that provides for the acceptance of plan-to-plan transfers with respect to the member, then the member may elect to have any portion of the member's account transferred to the defined benefit governmental plan. A transfer under this section may be made before the member has had a severance from employment.

(2)   A transfer may be made under this section only if the transfer is either for the purchase of permissive service credit (as defined in section 415(n)(3)(A) of the Code) under the receiving defined benefit governmental plan or a repayment to which section 415 of the Code does not apply by reason of section 415(k)(3) of the Code.

(3)   In addition, if a plan-to-plan transfer does not constitute a complete transfer of the member's or Beneficiary's interest in the transferor plan, the Program shall treat the amount transferred as a continuation of a pro rata portion of the member's or Beneficiary's interest in the transferor plan (e.g., a pro rata portion of the member's or Beneficiary's interest in any after-tax employee contributions).

[Source: Amended at 11 Ok Reg 4409, eff 7-14-94 through 7-14-95 (emergency); Amended at 12 Ok Reg 3285, eff 7-27-95; Amended at 13 Ok Reg 3899, eff 8-5-96 through 7-14-97 (emergency); Amended at 14 Ok Reg 3216, eff 7-25-97; Amended at 15 Ok Reg 48, eff 9-4-97 (emergency); Amended at 15 Ok Reg 3481, eff 7-15-98; Amended at 19 Ok Reg 2729, eff 7-11-02; Amended at 20 Ok Reg 382, eff 10-16-02 (emergency); Amended at 20 Ok Reg 2596, eff 7-11-03; Amended at 22 Ok Reg 2255, eff 6-25-05; Amended at 25 Ok Reg 2598, eff 7-11-08; Amended at 27 Ok Reg 131, eff 10-2-09 (emergency); Amended at 27 Ok Reg 1282, eff 5-27-10]

Note

EDITOR’S NOTE: This emergency action expired before being superseded by a permanent action. Upon expiration of an emergency amendatory action, the last prior permanent text is reinstated. Therefore, on 7-15-95 (after the 7-14-95 expiration of the emergency action), the text of section 715:10-19-8 reverted back to the permanent text that was effective prior to enactment of the emergenct action on 7-14-94, and remained as such until amended again by permanent action on 7-27-95.

EDITOR’S NOTE: This emergency action expired before being superseded by a permanent action. Upon expiration of an emergency amendatory action, the last prior permanent text is reinstated. Therefore, on 7-15-97 (after the 7-14-97 expiration of the emergency action), the text of section 715:10-19-8 reverted back to the permanent text that became effective 7-27-95, as was last published in the 1996 Edition of the OAC, and remained as such until amended again by permanent action on 7-25-97.