Massachusetts S 16: PERAC Regulations Governing Retirement of Public Employees

Bill Text

840 CMR: PUBLIC EMPLOYEE RETIREMENT ADMINISTRATION
840 CMR 3.00: INTERNAL REVENUE CODE COMPLIANCE PROVISIONS

SENATE..........................No. 16

The Commonwealth of Massachusetts

_______________
In the One Hundred and Ninety-Third General Court
(2023-2024)
_______________

REPORT OF THE

PUBLIC EMPLOYEE RETIREMENT
ADMINISTRATION COMMISSION

SUBMITTING AMENDMENTS TO THE RULES
AND REGULATIONS GOVERNING RETIREMENT
OF PUBLIC EMPLOYEES IN MASSACHUSETTS
(840 CMR 3.00 and 840 CMR 13.00)

(pursuant to Section 50 of
Chapter 7 of the General Laws)

January 26, 2023

840 CMR: PUBLIC EMPLOYEE RETIREMENT ADMINISTRATION
840 CMR 3.00: INTERNAL REVENUE CODE COMPLIANCE PROVISIONS

840 CMR 3.00. Internal Revenue Code Compliance Provisions

REGULATORY AUTHORITY

840 CMR 3.00: M.G.L. c. 32, § 21(4).

840 CMR: PUBLIC EMPLOYEE RETIREMENT ADMINISTRATION
840 CMR 3.00: INTERNAL REVENUE CODE COMPLIANCE PROVISIONS

3.01. Internal Revenue Code Compliance Provisions

Effective as of January 1, 1989, any retirement system subject to M.G.L. c.
32 will satisfy the qualification requirements in Internal Revenue Code
Section 401, as applicable, as a governmental plan within the meaning of
Internal Revenue Code Section 414(d). In order to meet those requirements,
the retirement system is subject to the following provisions, notwithstanding
any other provision of Massachusetts law.

840 CMR: PUBLIC EMPLOYEE RETIREMENT ADMINISTRATION
840 CMR 3.00: INTERNAL REVENUE CODE COMPLIANCE PROVISIONS

3.02. Internal Revenue Code Section 401(a)(1), (2)

Effective as of September 1, 1974, the assets of any retirement system
subject to M.G.L. c. 32 are held in trust and may not be used for or diverted
to any purpose other than for the exclusive benefit of the members and their
beneficiaries and for paying the retirement system's reasonable
administrative expenses.

840 CMR: PUBLIC EMPLOYEE RETIREMENT ADMINISTRATION
840 CMR 3.00: INTERNAL REVENUE CODE COMPLIANCE PROVISIONS

3.03. Internal Revenue Code Section 401(a)(8)

Effective as of September 1, 1974, and to confirm existing procedures, any
retirement system subject to M.G.L. c. 32 will not use forfeitures that arise
for any reason, including from termination of employment or death, to
increase the benefits of any member.

840 CMR: PUBLIC EMPLOYEE RETIREMENT ADMINISTRATION
840 CMR 3.00: INTERNAL REVENUE CODE COMPLIANCE PROVISIONS

3.04. Internal Revenue Code Section 401(a)(9)

(1) Effective as of January 1, 1989, any retirement system subject to M.G.L.
c. 32 will pay all benefits in accordance with a good faith interpretation of
the requirements of Internal Revenue Code Section 401(a)(9), as applicable
to a governmental plan within the meaning of Internal Revenue Code
Section 414(d).

(2) Notwithstanding any other provision of 840 CMR 3.04(2), effective on
and after January 1, 2003, any retirement system subject to M.G.L. c. 32 is
subject to the following provisions:

(a) Members must apply for benefits by completing all required forms
and benefits must begin by the required beginning date, which is the
later of April 1st of the calendar year following the calendar year in
which the member reaches age 72 (70½ if the member was born before
July 1, 1949) or April 1st of the calendar year following the calendar year
in which the member terminates employment.

(b) The member's entire interest must be distributed over the member's
life or the lives of the member and a designated beneficiary, or over a
period not extending beyond the life expectancy of the member or of the
member and a designated beneficiary.

(c) The life expectancy of a member, the member's spouse, or the
member's beneficiary may not be recalculated after the initial
determination for purposes of determining benefits.

(d) If a member dies after the required distribution of benefits has
begun, the remaining portion of the member's interest must be
distributed at least as rapidly as under the method of distribution before
the member's death.

(e) If a member dies before required distribution of the member's
benefits has begun, the member's entire interest must be either:

1. distributed (in accordance with federal regulations) over the

840 CMR: PUBLIC EMPLOYEE RETIREMENT ADMINISTRATION
840 CMR 3.00: INTERNAL REVENUE CODE COMPLIANCE PROVISIONS

life or life expectancy of the designated beneficiary, with the
distributions beginning no later than December 31st of the calendar
year following the calendar year of the member's death; or

2. distributed within five years of the member's death.

(3) The amount of an annuity paid to a member's beneficiary may not
exceed the maximum determined under the incidental death benefit
requirement of Internal Revenue Code Section 401(a)(9)(G), and
effective for any annuity commencing on or after January 1, 2008, the
minimum distribution incidental benefit rule under Treasury
Regulation Section 1.401(a)(9)-6, Q&A-2.

(4) The death and disability benefits provided by the retirement system are
limited by t