N.J. Admin. Code § 17:1-17.4

Current through Register Vol. 56, No. 23, December 2, 2024

Section 17:1-17.4 - Compliance with 26 U.S.C. 401(a)(31) for eligible rollover distributions

(a) Pursuant to 43:3C-20, and for purposes of compliance with 26 U.S.C. § 401(a)(31), this section applies notwithstanding any contrary provision or retirement law that would otherwise limit a distributee's election to make a rollover. A distributee may elect, at the time and in the manner prescribed by the retirement system, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

(b) As used in (a) above, the following terms shall have the following meanings.

1. "Eligible rollover distribution" means any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include:

i. Any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life or the life expectancy of the distributee or the joint lives or joint life expectancies of the distributee and the distributee's designated beneficiary, or for a specified period of 10 years or more;

ii. Any distribution to the extent such distribution is required under 26 U.S.C. § 401(a)(9), the portion that is not includible in gross income;

iii. Any other distribution that the Federal Internal Revenue Service does not consider eligible for rollover treatment, such as certain corrective distributions necessary to comply with the provisions of 26 U.S.C. § 415 or any distribution that is reasonably expected to total less than $ 200.00 during the year. Effective January 1, 2002, a portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions that are not includible in gross income. However, such portion may be transferred only:

(1) To an individual retirement account or annuity described in 26 U.S.C. §§ 408(a) and (b) or to a qualified defined contribution plan described in 26 U.S.C. § 401(a);

(2) On or after January 1, 2007, to a qualified defined benefit plan described in 26 U.S.C. § 401(a) or to an annuity contract described in 26 U.S.C. § 403(b), that agrees to separately account for amounts so transferred and earnings thereon, including separately accounting for the portion of the distribution that is includible in gross income and the portion of the distribution that is not so includible; or

(3) On or after January 1, 2008, to a Roth IRA described in 26 U.S.C. § 408A; and

iv. Effective January 1, 2002, the definition of eligible rollover distribution also includes a distribution to a surviving spouse or to a spouse or former spouse who is an alternate payee under a qualified domestic relations order, as defined in 26 U.S.C. § 414(p).

2. "Eligible retirement plan" means any of the following that accepts the distributee's eligible rollover distribution:

i. An individual retirement account described in 26 U.S.C. § 408(a);

ii. An individual retirement annuity described in 26 U.S.C. § 408(b);

iii. An annuity plan described in 26 U.S.C. § 403(b);

iv. A qualified trust described in 26 U.S.C. § 401(a);

v. Effective January 1, 2002, an annuity contract described in 26 U.S.C. § 403(b);

vi. Effective January 1, 2002, a plan eligible under 26 U.S.C. § 457(b) that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or a political subdivision of a state that agrees to separately account for amounts transferred into that plan from the retirement system; or

vii. Effective January 1, 2008, a Roth IRA described in 26 U.S.C. § 408A.

3. "Distributee" means an employee or former employee. It also includes the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in 26 U.S.C. § 414(p). Effective January 1, 2007, a distributee further includes a nonspouse beneficiary who is a designated beneficiary as defined by 26 U.S.C. § 401(a)(9)(E). However, a nonspouse beneficiary may only make a direct rollover to an individual retirement account or individual retirement annuity established for the purpose of receiving the distribution, and the account or annuity shall be treated as an "inherited" individual retirement account or annuity.

4. "Direct rollover" means a payment by the plan to the eligible retirement plan specified by the distributee.

N.J. Admin. Code § 17:1-17.4