Section 87.17 - Distributions(a) In general. Upon request, the plan administrator or TPA shall authorize the distribution of a participant's deferrals and investment income in accordance with the applicable distribution agreement so long as: (1) the participant has attained age 70.5;(2) the participant has died;(3) the participant's employment with the state of Texas has terminated other than through death;(4) the participant has complied with subsection (l) of this section relating to the one-time election of distribution that does not exceed the dollar limit under Code §457(e)(9);(5) the participant elects to have any portion of his or her account balance transferred to a tax-qualified governmental defined benefit plan (as defined in §414(d) of the Code) in the same state or another state that provides for the acceptance of plan-to-plan transfers with respect to the participant; or(6) the participant elects a transfer to be made if the transfer is either for the purchase of permissible service credit (as defined in §415(n)(3) of the Code and as amended by the Pension Protection Act of 2006) under the receiving governmental defined benefit plan, or if the transfer is for a repayment to which §415 of the Code does not apply by reason of §415(k)(3) of the Code.(b) Definitions. (1) In subsections (m) - (o) of this section, the term "participant's deferrals and investment income" means the cash value of the participant's deferrals and investment income after considering all surrender charges, costs of insurance, forfeitures, and other similar charges.(2) In this section, a beneficiary or secondary beneficiary "survives" another person only if the beneficiary or secondary beneficiary is alive on the day after the person's death.(c) Content of a distribution agreement. (1) A distribution agreement must contain but shall not be limited to: (A) identifying information concerning the participant, including the date of birth and social security number of the participant;(B) the name of the prior plan vendor or revised plan vendor covered by the agreement;(C) the type of qualified investment product from which distributions will be made, including policy/certificate/or account number;(D) the date on which the participant separated from service, attained age 70.5, or died, whichever is applicable;(E) the beginning date of the distributions;(F) the type of distribution;(G) the amount to be distributed during each time period or the method for calculating the amount to be distributed during each time period; and(H) beneficiary information, including date of birth(s) and social security number(s).(2) The person filing the distribution agreement must attach a properly executed Form W-4P to the agreement.(3) A distribution agreement must be consistent with the distribution options available for the qualified investment product covered by the agreement. The prior plan vendor agent/representative signature on the distribution agreement signifies that the distribution option is available and can be implemented as requested.(d) Commencement of distributions. Notwithstanding anything in a distribution agreement: (1) the earliest a participant or beneficiary may begin receiving a distribution is the 51st day after the occurrence that entitles the participant or beneficiary to the distribution, except this paragraph does not apply to an emergency withdrawal or a one-time election distribution; and(2) A participant must begin receiving a distribution by the later of: (A) April 1st of the year following the calendar year in which the participant attains age 70.5; or(B) April 1st of the year following the year in which the participant retires or otherwise has a separation from employment.(e) Filing of distribution agreements by participants. (1) This subsection applies when a participant becomes entitled to a distribution because: (A) the participant has attained age 70.5; or(B) the participant's employment with the state of Texas has terminated other than through death.(2) A participant must file a single distribution agreement for all qualified investment products in which the participant's deferrals are invested.(3) Notwithstanding anything to the contrary in this subsection, a participant who has not separated from service and who has reached age 70.5 may file a distribution agreement if the participant wants to begin distributions. If distributions commence in the calendar year following the later of the calendar year in which the participant attains age 70.5 or the calendar year in which the separation from employment occurs, the distribution must be equal to the annual installment payment for the year, determined under the Uniform Lifetime Table of the Income Tax Regulations for the participant's age regarding types of distributions. This must also be paid before the end of the calendar year of commencement of distributions.(4) Notwithstanding any other plan provision, amounts deferred by a former participant of the plan not yet payable or made available to such participant may be transferred to another eligible plan of which the former participant has become a participant, if: (A) the plan receiving such amounts provides for its acceptance; and(B) a participant separates from service with the participant's agency and accepts employment with another entity maintaining an eligible deferred compensation plan.(5) A participant or a beneficiary of a participant who previously filed an irrevocable distribution election under the prior plan or under the revised plan may change that distribution election or cancel that distribution election by notifying the plan administrator. Such notification must be in writing on a distribution agreement form and received by the plan administrator at least 30 days prior to the scheduled distribution date.(6) A participant may request a trustee-to-trustee transfer of assets from the prior plan or the revised plan to a governmental defined benefit plan in the same state or another state for the purchase of permissible service credit (as defined in the Code §414(d) and (p) and Code §415(n)(3)(A), as amended by the Pension Protection Act of 2006) under such plan or a repayment to which Code §415 does not apply by reason of subsection (k)(3) thereof. The participant may elect to have any portion of the account balance transferred to a governmental defined benefit plan.(7) Upon receipt of a certified copy of a qualified domestic relations order, a certified copy of a judgment, decree or order (including approval of a property settlement agreement) that relates to the provision of child support, alimony payments, or the marital property rights of a spouse or former spouse, child, alternate payee, or other dependent of a participant, and same is made pursuant to the domestic relations law of any state, then the amount of the participant's account balance shall be paid in the manner and to the person or persons so directed in the domestic relations order. Such payment shall be made without regard to whether the participant is eligible for a distribution of benefits under the plan. The plan administrator or TPA shall establish reasonable procedures for determining the status of any such decree or order and for effectuating distribution pursuant to the domestic relations order. (§414(p) of the Code and §1.457-10(c) of the Income Tax Regulations).(8) At a participant's, surviving spouse's, or beneficiary(s) request, the plan administrator may process a trustee-to-trustee transfer of an eligible rollover distribution upon receipt of appropriate instructions from the receiving plan. If a beneficiary is a non-spouse, the non-spouse may request a rollover to an inherited IRA.(f) Minimum distributions during the life of a participant. (1) This subsection applies to distributions to a participant during the life of the participant, notwithstanding anything to the contrary in the participant's distribution agreement.(2) The amount distributed to the participant must be calculated so that the distributions: (A) will be distributed over a period not exceeding the life expectancy of the participant as set forth in the Uniform Lifetime Table of the Income Tax Regulations for the participant's age on the participant's birthday for that year or the life expectancy of the participant and the participant's named beneficiary;(B) will satisfy the minimum distribution requirements of the Code §457(d)(2), §401(a)(9), and associated statutes and regulations; and(C) For the purpose of paragraph (2) of this subsection, life expectancies may not be recalculated annually. For any year, the participant 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.(3) The plan administrator shall reject a proposed distribution agreement that does not comply with paragraph (2) of this subsection. The plan administrator shall require the amendment of an existing distribution agreement that does not comply with paragraph (2) of this subsection.(g) Review of distribution agreements by the plan administrator. The plan administrator shall review each distribution agreement received to ensure that: (1) a distribution would be in compliance with the sections in this chapter; and(2) the minimum distribution requirements of this section have been satisfied.(h) Amendments of distribution agreements. (1) Beginning date for a distribution. The beginning date for a distribution may be deferred or cancelled, and the amended distribution agreement must be received by the plan administrator no later than the 30th day before the original distribution begin date.(2) Frequency of distribution. The frequency of a distribution may be amended if the plan administrator receives an amended distribution agreement no later than the 30th day before the next scheduled distribution.(3) Amount of distribution. The amount to be distributed during each time period may be amended only if the plan administrator receives an amended distribution agreement no later than the 30th day before the next scheduled distribution.(4) Beneficiaries. (A) The primary and secondary beneficiaries named in a distribution agreement may be changed at anytime by filing a change agreement with the benefits coordinator of the state agency at which the participant was employed or by submitting a beneficiary designation form directly with the TPA, for the revised plan.(B) Upon receipt of the change agreement, the benefits coordinator shall send a copy of the agreement to the plan administrator.(C) The change agreement is effective upon receipt by the plan administrator.(5) Unforeseeable emergency distribution. Notwithstanding anything to the contrary in this subsection, a distribution agreement may be amended to relieve a severe financial hardship caused by an unforeseeable emergency.(6) Procedures for amending a distribution agreement. (A) A participant or beneficiary who wants to amend the participant's distribution agreement must file an amended distribution agreement with the plan administrator.(B) Upon receipt of the amended distribution agreement, the plan administrator; shall promptly review the agreement for compliance with the sections in this chapter.(C) If the amended distribution agreement does not comply with the sections in this chapter, the agreement will be returned to the participant or beneficiary for corrections.(D) After the plan administrator receives a signed distribution agreement, the plan administrator and the prior plan vendor or TPA covered by the agreement shall take the steps specified in subsections (h) and (j) of this section.(7) Effective date of amended distribution agreements is no later than 30 days after the plan administrator receives the form. An amended distribution agreement is effective with the next distribution.(i) Procedure for making distributions. (1) Upon receiving a letter of authorization, the prior plan vendor or TPA shall issue checks payable to the participant or beneficiary and mail the checks as instructed in the letter of authorization.(2) The plan administrator may not complete any forms provided by a prior plan vendor in connection with a distribution. A prior plan vendor may not require the plan administrator to submit periodic letters of authorization beyond the initial letter of authorization unless the plan administrator has agreed in writing. A prior plan vendor may not impose any requirements as a prerequisite to a distribution that are not specifically mentioned in the sections in this chapter.(3) The plan administrator shall provide each prior plan vendor with the names and signatures of the individuals who are authorized to sign letters of authorization.(4) A prior plan vendor shall confirm each letter of authorization as instructed in the letter.(j) Unforeseeable emergency distribution. (1) The participant must request the unforeseeable emergency withdrawal by filing a completed emergency hardship withdrawal application with the plan administrator or TPA. An emergency hardship withdrawal application must show that the prerequisites for making an unforeseeable emergency withdrawal have been fulfilled.(2) The plan administrator shall approve the unforeseeable emergency withdrawal if the plan administrator determines, based on a representation from the participant in a form prescribed by the plan administrator or TPA, that: (A) an unforeseeable emergency has occurred;(B) the severe financial hardship cannot be relieved: (i) through reimbursement or compensation by insurance or otherwise;(ii) by liquidating the assets of the participant to the extent the liquidation of the assets would not itself cause severe financial hardship;(iii) by cessation of deferrals under the plan;(iv) by other distributions or nontaxable loans from the Plan or any other qualified retirement plan, or by borrowing from commercial sources on reasonable commercial terms; or(v) through a combination of the actions specified in clauses (i) - (iii) of this subparagraph; and(C) the unforeseeable emergency withdrawal would satisfy the federal regulations for unforeseeable emergency withdrawals under the Code §457.(3) If the plan administrator or TPA approves an unforeseeable emergency withdrawal, the plan administrator shall determine the amount of the withdrawal. The amount may not exceed the amount reasonably needed to overcome the severe financial hardship, after considering the federal income tax liability resulting from the withdrawal.(4) The term "unforeseeable emergency" means a severe financial hardship to a participant or participant's beneficiary caused by: (A) a sudden and unexpected illness or accident of a participant or of a participant's dependent (as defined in the Code §457, §152(a), and the Working Families Tax Relief Act of 2004;(B) the loss of the property of a participant or participant's beneficiary because of a casualty (including the need to rebuild a home following damage to a home not otherwise covered by homeowner's insurance, as a result of a natural disaster); or(C) a similar extraordinary and unforeseeable circumstance arising from events beyond the control of a participant, which includes the prevention of imminent foreclosure or eviction from a participant's or beneficiary's primary residence, funeral expenses of participant's dependents (as defined in §152(a) of the Code and the Working Families Tax Relief Act of 2004), and payment of non-reimbursed medically necessary expenses, which includes non-refundable deductibles, as well as the cost of prescription drug medications.(5) The term "unforeseeable emergency" excludes: (A) the necessity to send a child to college;(B) the purchase of a home;(C) such emergency that is or may be relieved through: (i) reimbursement or compensation from insurance or otherwise;(ii) liquidation of the participant's assets, to the extent the liquidation would not itself cause severe financial hardship;(iii) cessation of deferrals under the plan;(iv) other distributions or nontaxable loans from the Plan or any other qualified retirement plan, or by borrowing from commercial sources on reasonable commercial terms; or(v) through a combination of the actions specified in clauses (i) - (iv) of this subparagraph.(D) other similar circumstances.(6) The plan administrator may rely on the information and certification provided by a participant in connection with the participant's request for an emergency withdrawal. The participant is solely responsible for the sufficiency, accuracy, and veracity of the information.(7) If the plan administrator denies a participant's request for an emergency withdrawal or if the participant disagrees with the amount of the approved emergency withdrawal, the participant may appeal to the Employees Retirement System of Texas in accordance with § 87.23 of this title (relating to the Grievance Procedure).(8) When submitting a request for an emergency withdrawal, the participant must certify, in a form prescribed by the plan administrator, that the severe financial hardship cannot be relieved by cessation of deferrals under the plan, as well as other means set forth in paragraph (2)(B)(i)-(v) of this subsection.(9) The plan administrator may approve an emergency withdrawal request from a primary or secondary beneficiary.(10) The plan administrator may not exceed the amount reasonably necessary to satisfy the emergency need (which may include any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution).(k) A participant may elect to receive a one-time distribution of the total account balance if: (1) such amount does not exceed the $5000 dollar limit under Code §457, §457(e)(9), or the dollar limit under Code §411(a)(11) if greater as of the date that payments commence or on the date of the participant's death. In such event, payment shall be made to the participant (or to the beneficiary if the participant is deceased) in a lump sum equal to the participant's account balance;(2) no amount has been deferred under the plan with respect to such participant during the two-year period ending on the date of the distribution;(3) there has been no prior distribution under the plan to such participant to which this subsection applied; and(4) a one-time election form is completed and submitted to the plan administrator through the participant's state benefits coordinator.(l) Naming of beneficiaries. When a participant or beneficiary files a distribution agreement, the participant or beneficiary may name one or more primary and secondary beneficiaries. The naming of beneficiaries in a distribution agreement supersedes any previous naming of beneficiaries in a participation agreement or change agreement.(m) Death of a participant when the participant has named a beneficiary. (1) This subsection applies only if a participant has named a beneficiary in a participation agreement, change agreement, beneficiary designation form or distribution agreement.(2) The plan administrator shall order a distribution to a primary beneficiary if the beneficiary: (A) survives the participant; and(B) is alive on the date of the order.(3) The plan administrator shall order a distribution to a secondary beneficiary if: (A) the secondary beneficiary survives the participant;(B) the secondary beneficiary is alive on the date of the order; and(C) no primary beneficiaries survive the participant.(4) The plan administrator shall order a distribution in accordance with subsection (p) of this section if a primary or secondary beneficiary survives the participant but is not alive on the date of the order.(5) This paragraph applies if a participant designates more than one primary beneficiary and more than one primary beneficiary survives the participant. The plan administrator shall order the distribution of the participant's deferrals and investment income to the surviving primary beneficiaries in equal shares unless the distribution agreement provides otherwise. The estates and heirs of the primary beneficiaries who did not survive the participant and the surviving secondary beneficiaries, if any, may not receive any benefits.(6) This paragraph applies if a participant designates more than one secondary beneficiary, more than one secondary beneficiary survives the participant, and no primary beneficiary survives the participant. The plan administrator shall order the distribution of the participant's deferrals and investment income to the surviving secondary beneficiaries in equal shares unless the distribution agreement provides otherwise. The estates and heirs of the primary and secondary beneficiaries who did not survive the participant may not receive any benefits.(7) The plan administrator shall order the lump-sum payment to the participant's estate of the balance of the participant's deferrals and investment income if: (A) the participant named a primary and a secondary beneficiary but neither survived the participant; or(B) the participant named a primary beneficiary but did not name a secondary beneficiary and the primary beneficiary did not survive the participant.(8) The plan administrator shall order the lump-sum distribution of a participant's deferrals and investment income to the person entitled to receive the distribution if the person is alive on the date of the order and the person files a distribution agreement requesting a lump-sum distribution.(9) When the plan administrator orders a distribution to a primary or secondary beneficiary, the plan administrator's order must be in accordance with the beneficiary's distribution agreement so long as the agreement complies with the sections in this chapter.(10) This paragraph applies when the plan administrator orders other than a lump-sum distribution to a primary or secondary beneficiary and distributions to the participant did not begin before the participant's death. For distributions to a surviving spouse, any distribution made before the calendar year in which the participant would have attained age 70.5 is not a required minimum distribution. For the calendar year in which the participant would have attained age 70.5 or any later year, the amount of the minimum annual distribution payment may be treated as the amount of the required minimum distribution. Notwithstanding a primary or secondary beneficiary's distribution agreement, the amount distributed must be calculated so that the distributions: (A) will begin no later than December 31 in the year that the participant would have attained age 70.5 or December 31 of the year following the participant's death, whichever is later for a spousal beneficiary; or(B) December 31 of the year following the participant's death and entire amount must be distributed by the end of the fifth year following the year of participant's death for non-spousal beneficiary.(C) will be made over the life of the person receiving the distributions or over a period not extending beyond the life expectancy of the person (using the single life table from the Income Tax Regulations);(D) will be made in substantially non-increasing amounts;(E) will be made annually or more frequently than annually after the first distribution; and(F) will satisfy the minimum distribution requirements of the Code §457(d)(2), §401(a)(9), and associated statutes and regulations.(11) This paragraph applies when the plan administrator orders other than a lump-sum distribution to a primary or secondary beneficiary and distributions to the participant began before the participant's death. Notwithstanding a primary or secondary beneficiary's distribution agreement, the amount distributed to the primary or secondary beneficiary must be calculated so that the distributions: (A) will be made at least as rapidly as under the method of distribution selected by the participant; and(B) will satisfy the minimum distribution requirements of the Code §457(d)(2), and §401(a)(9).(12) If a participant dies before distributions to him began and the beneficiary or secondary beneficiary entitled to receive the participant's deferrals and investment income is the participant's surviving spouse, this paragraph applies. (A) Paragraph (10) of this subsection applies to the distributions to the surviving spouse except as specified in this paragraph.(B) Notwithstanding paragraph (10) of this subsection, the surviving spouse may delay the start of the receipt of the deferrals and investment income until a date not later than the date when the participant would have attained age 70.5.(C) Notwithstanding paragraph (10) of this subsection, after a distribution to the surviving spouse begins, the entire amount must be paid over a period not exceeding the spouse's life expectancy using the single life table from the Income Tax Regulations for the beneficiary's age on the beneficiary's birthday for the year that the distribution begins, reduced by one for each year that has elapsed after that year.(D) If the surviving spouse dies before distributions to the spouse begin, then the surviving spouse is a participant for the purpose of paragraph (10) of this subsection.(13) For the purpose of paragraphs (10) - (12) of this subsection, life expectancies may not be recalculated annually.(n) Death of a participant when the participant has not named a beneficiary. (1) This subsection applies only when a participant has not named a beneficiary in a participation agreement, change agreement, beneficiary designation form, or distribution agreement.(2) The plan administrator shall order the distribution to the participant's estate of the balance of the participant's deferrals and investment income.(o) Death of a beneficiary. (1) This subsection applies if: (A) a participant named a beneficiary in a participation agreement, change agreement, or distribution agreement or a beneficiary designation form;(B) the participant died;(C) the beneficiary survived the participant but has since died;(D) the plan administrator has ordered, in accordance with subsection (m) of this section, a distribution to the beneficiary or would have ordered a distribution to the beneficiary if the beneficiary had not died; and(E) the beneficiary did not receive all the participant's deferrals and investment income before the beneficiary's death.(2) If the deceased beneficiary filed a distribution agreement and the agreement names a primary beneficiary, the plan administrator shall: (A) allow the primary beneficiary to have a distribution which will be made at least as rapidly as under the method of distribution selected by the participant, and which will also satisfy the minimum distribution requirements of the Code §457(d)(2), and §401(a)(9); or(B) order a lump sum payment to the primary beneficiary's estate if the primary beneficiary survived the beneficiary who filed the distribution agreement but is not alive on the date of the order.(3) If the deceased beneficiary filed a distribution agreement and the agreement names a secondary beneficiary, the plan administrator shall order a lump-sum payment to: (A) the secondary beneficiary if: (i) the secondary beneficiary is alive on the date of the order; and(ii) no primary beneficiary survived the deceased beneficiary;(B) the secondary beneficiary's estate if: (i) the secondary beneficiary survived the deceased beneficiary;(ii) the secondary beneficiary is not alive on the date of the plan administrator's order; and(iii) no primary beneficiary survived the deceased beneficiary.(4) The lump-sum payment must be made to the estate of the deceased beneficiary if: (A) the deceased beneficiary's distribution agreement does not name a beneficiary;(B) the deceased beneficiary did not file a distribution agreement; or(C) no beneficiary named in the deceased beneficiary's distribution agreement survived the deceased beneficiary.(5) When more than one primary or secondary beneficiary of a deceased beneficiary is entitled to a lump-sum distribution, the distributions must be made in equal shares unless the deceased beneficiary's distribution agreement provides otherwise.(p) Distributions to minors and incompetents. (1) The plan administrator may authorize the payment of a distribution to a person or entity other than the participant or beneficiary otherwise entitled to receive the distribution if satisfactory evidence is presented to the plan administrator that the participant or beneficiary is: (B) has been adjudicated by a court of law as mentally incompetent and unable to provide a valid release, receipt and discharge for the payment or is deemed so by the plan administrator.(2) If the conditions of the preceding paragraph are satisfied, the plan administrator shall make the distribution payable to the guardian of the participant or beneficiary. Such payments shall be considered a payment to such participant or beneficiary, and shall, to the extent made, be deemed a complete discharge of any liability of the Plan, state of Texas, plan administrator and TPA for all payments required under the plan.(3) If no guardian has been appointed and after having obtained a proper release, the plan administrator shall make the distribution payable to: (A) the person or entity maintaining custody of the participant or beneficiary;(B) the custodian of the participant or beneficiary under the Texas Uniform Gifts to Minors Act (Texas Property Code, §§ 141.002 et seq.) if the participant or beneficiary resides in the state of Texas;(C) the custodian of the participant or beneficiary under a law similar to the Texas Uniform Gifts to Minors Act if the participant or beneficiary resides outside the state of Texas; or(D) the court of law with jurisdiction over the participant or beneficiary.(q) Distributions to missing persons. (1) This subsection applies when the plan administrator is unable to determine the location of a participant or beneficiary who is entitled to a distribution.(2) When the plan administrator does not know the location of a participant or beneficiary, the benefits coordinator for the participant or beneficiary must send a certified letter to the last known address of the participant or beneficiary.(3) If the certified letter does not result in the discovery of the location of the participant or beneficiary, the benefits coordinator shall inform the plan administrator and provide proof to the plan administrator that the certified letter was sent.(4) When the plan administrator does not know the location of a participant or beneficiary, the benefits coordinator, TPA or plan administrator shall make a reasonable attempt to locate the participant or beneficiary through certified mail at the last known address, through notification to the Social Security Administration, the Pension Benefit Guaranty Corporation, or other appropriate source. If the participant has not responded within six (6) months, upon receiving the notification and proof of mailing, the plan administrator may direct that all benefits due the participant or beneficiary be deposited in a qualified investment product or trust fund that the plan administrator has specifically designated for this purpose and shall continue to hold the benefits due such person.(r) Processing of distributions and emergency withdrawals. A prior plan vendor or TPA shall process distributions and emergency withdrawals and resolve administrative problems with the plan administrator within a reasonable length of time, not to exceed the 30th day after receiving a letter of authorization for distributions and not to exceed the 15th day after receiving a letter of authorization for emergency withdrawals.(s) Loans to participants. The plan administrator is authorized to implement procedures to establish a loan program for the revised plan in compliance with Code §72(p)(2). Plan loans shall be permitted only from assets deposited in the revised plan. Participants with account balances in the prior plan must transfer those balances to the revised plan in order to qualify for a plan loan. The security of the loan is a pledge. There is a non-refundable application fee for each loan. General loans are processed without any pre-loan paperwork. A participant's execution on the loan check authorizes the plan administrator to make payroll deductions from the participant's compensation (Code §1.401(a)-21(d)). The loan balance may be prepaid at any time without penalty. The maximum number of active loans available to any participant at any given time is two (2) per plan. (1) Loans made pursuant to this section (when added to the outstanding balance of all other loans made by the plan to the participant) shall be limited to the lesser of: (A) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans from all plans to the participant during the one year period ending on the day before the date on which such loan is made, over the outstanding balance of loans from all plans to the participant on the date on which such loan was made; or(B) the greater of one half (1/2) of the present value of the non-forfeitable accrued benefit of the participant under the plan or $10,000.(2) Any loan may not be for an amount less than $1,000.(3) The terms of the loan shall: (A) require level amortization with payments not less frequently than monthly throughout the repayment period, except that alternative arrangements for repayment may apply in the event that the participant is on a bona fide unpaid leave of absence for military leave within the meaning of §414(u) of the Code or for the duration of a leave which is due to qualified military service;(B) require that the loan be repaid within five years unless the participant certifies in writing to the plan administrator that the loan is to be used to acquire a principal residence; and(C) provide for either a general purpose loan or a principal residence loan with rates and terms fixed for the life of the loan. Subject to change from time to time, the interest rate for repayment is one percent (1%) over the prime rate published in the Wall Street Journal on the last business day of the prior month.(4) Any loan to a participant under the plan shall be secured by the pledge of the portion of the participant's interest in the plan invested in such loan.(5) In accordance with the federal Soldiers' & Sailors' Civil Relief Act of 1940, interest will accrue during the period of suspended payments at the original loan rate or at the rate of six percent (6%), whichever is less. In no event will interest on any loan exceed the maximum rate permitted by applicable law.(6) In the event that a participant fails to make any loan payment by the last day of the calendar quarter following the calendar quarter such payment is due, a default on the loan shall occur. In the event of such default, all remaining payments on the loan shall be immediately due and payable the day following the date on which such payment was due. In the case of any loan default, the plan administrator shall apply the portion of the participant's interest in the plan held as security for the loan in satisfaction of the loan on the date of severance from employment. In addition, the plan administrator shall take any legal action it shall consider necessary or appropriate to enforce collection of the unpaid loan, and the costs of any legal proceeding or collection including, but not limited to the plan administrator's and TPA's reasonable attorneys fees, costs and prejudgment and postjudgment interest, shall be charged to the account balance of the participant. Any defaulted loans incurred will continue to accrue interest and will reduce the number of available loans. Amounts borrowed through the loan program are not taxable distributions and are not subject to federal income taxes, unless the participant defaults on the loan. If a participant retires or separates from employment, payroll deductions will stop and the loan is immediately due and payable in full. If the loan is not paid prior to the last day of the calendar quarter following the calendar quarter in which the payment was due, then the entire outstanding balance, pursuant to IRS regulations, will be considered a distribution, and the plan administrator shall report the loan to the IRS as a taxable distribution for the year that the loan defaults. Effective January 1, 2006, participants may make manual payments to pay off the loan after separating from employment. In the event a loan is outstanding or in default or both hereunder on the date of a participant's death, the participant's estate shall be the beneficiary as to the portion of participant's interest in the plan invested in such loan.(7) In accordance with Code §72 (p) and associated Treasury Regulations at §1.72(p)-1, the Plans will suspend payments for up to twelve (12) months for non-military leaves of absence if the participant is on a bona fide leave of absence and the leave is either without pay, or the participant's after-tax pay is less than the payment amount under the terms of the loan. When payments resume, payments may not be less than the amount required under the terms of the original loan. In no event may the term of the loan be extended beyond its original due date without approval of the plan administrator. Therefore, the participant must seek a revised amortization schedule and pay higher monthly payments or continue the original payment schedule and make one or more additional payments before the end of the loan term in sufficient amounts to pay the loan in full when due.(8) As a condition of the loan, a participant shall be required to enter into an irrevocable agreement authorizing the employer to make payroll deductions from his or her compensation as long as the participant is an employee and to transfer such payroll deduction to the Trustee or TPA in payment of such loan plus interest. Repayments of a loan shall be made by payroll deduction of equal amounts (comprised of both principal and interest) from pay, with the first such deduction to be made as soon as practicable after the loan funds are disbursed; provided, however: (A) that a participant may prepay the entire outstanding balance of his or her loan at any time without penalty (but may not make a partial prepayment); and(B) that if any payroll deductions cannot be made in full because a participant is on an unpaid leave of absence or is no longer employed by a participating employer (that has consented to make payroll deductions for this purpose) or the participant's paycheck is insufficient for any other reason, the participant shall pay directly to the plan the full amount that would have been deducted from the participant's paycheck, with such payment to be made by the last business day of the calendar month in which the amount would have been deducted. Such participants will repay themselves with interest through payroll deductions in equal installments over the duration of the loan. Loan repayments are deducted each pay period and posted along with contributions. Loan refinancing is not available.(t) Federal withholding and reporting requirements. (1) A prior plan vendor or TPA shall file all reports required by the Internal Revenue Service (IRS) when any deferrals and investment income are distributed or otherwise made available to a participant or beneficiary. Payments made to a participant during the participant's life must be reported as taxable wages on a Form 1099-R or another appropriate form which may be hereafter promulgated by the IRS. Pursuant to the provisions of Internal Revenue Service Revenue Ruling 86-109 (1986-2 CB 196), payments to the beneficiary of a deceased participant must be reported on IRS Form 1099-R (or another appropriate form which may be hereafter promulgated by the IRS) as taxable income of the beneficiary.(2) A prior plan vendor or TPA shall file an application for authorization to act as agent of the state of Texas, or effective January 1, 1999, the plan, with the District Director of the Internal Revenue Service Center where the prior plan vendor or TPA files its returns. The application shall include Form 2678 - Employer Appointment of Agent under §3504 of the Code, which shall be supplied by the plan administrator, and shall be completed and filed in accordance with the instructions set forth in Internal Revenue Service Publication 1271. The prior plan vendor shall promptly furnish to the plan administrator a copy of such vendor's letter of authorization from the Internal Revenue Service approving the appointment of the prior plan vendor as agent.(3) When reporting to the Internal Revenue Service, the prior plan vendor and TPA shall use the vendor's Federal Employer Identification Number and shall comply with all requirements of Revenue Procedure 70-6 as set out in Internal Revenue Service Publication 1271 and as subsequently amplified or superseded by subsequent Revenue Procedures. A prior plan vendor may not use the federal employer identification number of the plan, plan administrator, TPA, or the state of Texas. Regardless of how many qualified investment products a prior plan vendor sponsors, the vendor must use the same federal employer identification number for all reports to the Internal Revenue Service.(4) Federal tax withholding is mandatory for certain distributions to participants or beneficiaries. Distributions with a periodic payout of less than 10 years and lump sum distributions, other than required minimum distributions, are "eligible rollover distributions" subject to a mandatory 20 percent federal income tax withholding unless distributed in a direct rollover to an eligible retirement plan. Vendors who maintain participant account balances in the prior plan shall provide the required IRC §402(f) safe harbor notice to all 457 plan participants or their beneficiaries prior to the payment of an eligible rollover distribution. Tax notices may be provided electronically or in writing to the participant. For all distributions other than eligible rollover distributions, a prior plan vendor or TPA shall accurately determine any amounts to be withheld for federal taxes based on a Form W-4P submitted by the participant at the time of a distribution. If no Form W-4P is provided, the participant shall be taxed as "single with no dependents." The Tax Equity and Fiscal Responsibility Act does not apply to a deferred compensation plan governed by the Code §457.(5) Total death benefits, including life insurance proceeds, are taxable as ordinary income to the beneficiary and must be reported on a Form 1099-R in accordance with subsection (m) of this section.(6) A prior plan vendor or TPA shall mail a copy of all reports filed with the Internal Revenue Service about a participant or beneficiary to the participant's or beneficiary's home address.(u) Notwithstanding any provisions to the contrary, the option to receive periodic distributions from a product in the "prior plan" by a terminated participant or beneficiary whose original distribution begins on or after October 1, 2004 is removed. Effective October 1, 2004, terminating participants and beneficiaries must transfer all funds to the revised plan, receive a lump sum distribution of their entire plan balance, or roll their entire account balance into an account outside of the prior plan.34 Tex. Admin. Code § 87.17
The provisions of this §87.17 adopted to be effective March 28, 1991, 16 TexReg 1560; amended to be effective January 10, 1992, 16 TexReg 7743; amended to be effective November 23, 1992, 17 TexReg 7911; amended to be effective November 9, 1994, 19 TexReg 8617; amended to be effective January 5, 1996, 20 TexReg 11022; amended to be effective November 11, 1996, 21 TexReg 10766; amended to be effective March 21, 1997, 22 TexReg 2513; amended to be effective December 8, 1997, 22 TexReg 11718; amended to be effective February 12, 1998, 23 TexReg 1113; amended to be effective September 10, 1998, 23 TexReg 9067; amended to be effective January 10, 1999, 24TexReg165;amendedtobeeffectiveJanuary5, 2003, 27 TexReg 12370; amended to be effective September 11, 2003, 28 TexReg 7785; amended to be effective September 30, 2004, 29 TexReg 9204; amended to be effective May 29, 2005, 30 TexReg 3023; amended to be effective January 10, 2006, 31 TexReg 170; amended to be effective September 14, 2006, 31 TexReg 7367; amended to be effective June 14, 2007, 32 TexReg 3357; amended to be effective December 31, 2007, 32 TexReg 10054