The Division of Retirement and Benefits proposes to adopt IRS compliance changes to comply with federal compliance provisions for the State of Alaska Retirement System Plans as required and under the Internal Revenue Code of 1986, as amended, related to Treasury Regulations and other applicable federal laws, the following is hereby amended effective January 1, 2024 to comply with mandator requirements under the Secure 2.0 Act:
PUBLIC EMPLOYEES’ RETIREMENT SYSTEM TIERS I, II, AND III DEFINED BENEFIT PLANS
Subsection B. Distribution Requirements is amended as follows:
Notwithstanding any other provisions to the contrary, and pursuant to AS 39.35.370 and AS 39.35.371, the entire interest of a member must be distributed or begin to be distributed no later than the Employee’s required beginning date. If a plan member fails to apply for retirement benefits by April 1 of the calendar year following the calendar year in which he or she reaches [70-1/2 OR APRIL 1 OF THE CALENDAR YEAR FOLLOWING THE CALENDAR YEAR IIN WHICH HE OR SHE TERMINATES EMPLOYMENT, WHICHEVER IS LATER] 73 after December 31, 2022, and age 75 for an individual who attains age 74 after December 31, 2032, the plan will begin distributing the benefits as required by this section. Death benefits must be distributed in accordance with 26 U.S.C. 401(a)(9)(G) and the regulations implementing that section.
Section F. Corrections
Expansion of Employee Plans Compliance Resolution System. Because of the ever-growing complexity of retirement plan administration, Section 305 expands the Employee Plans Compliance Resolution System (“EPCRS”) to (1) allow more types of errors to be corrected internally through self-correction, (2) apply to inadvertent IRA errors, and (3) exempt certain failures to make required minimum distributions from the otherwise applicable excise tax. For example, Section 305 allows for correction of many plan loan errors through self-correction, which are a frequent area of error and can be burdensome to correct a single loan error through the Internal Revenue Service. Section 305 is effective on the date of enactment of this Act. Any guidance or revision of guidance required by Section 305 shall be promulgated no later than 2 years after the date of enactment of this Act. Revenue Procedure 2021–30 (or any successor guidance) shall be updated to take into account the provisions of this section no later than 2 years after the date of enactment of this Act.
TEACHERS’ RETIREMENT SYSTEM TIERS I AND II DEFINED BENEFIT PLANS
F. INCREASE IN AGE FOR REQUIRED BEGINNING DATE FOR MANDATORY DISTRIBUTIONS.
(a) IN GENERAL—Section 401(a)(9)(C)(i)(I) of the Internal Revenue Code of 1986 is amended by striking “age 72” and inserting “the applicable age”.
(b) SPOUSE BENEFICIARIES; SPECIAL RULE FOR OWNERS.—Subparagraphs (B)(iv)(I) and (C)(ii)(I) of section 401(a)(9) of such Code are each amended by striking “age 72” and inserting “the applicable age”.
(c) APPLICABLE AGE.—Section 401(a)(9)(C) of such Code is amended by adding at the end the following new clause:
“(v) APPLICABLE AGE.—
“(I) In the case of an individual who attains age 72 after December 31, 2022, and age 73 before January 1, 2030, the applicable age is 73.
“(II) In the case of an individual who attains age 73 after December 31, 2029, and age 74 before January 1, 2033, the applicable age is 74.
“(III) In the case of an individual who attains age 74 after December 31, 2032, the applicable age is 75.”.
(d) CONFORMING AMENDMENTS.—The last sentence of section 408(b) of such Code is amended by striking “age 72” and inserting “the applicable age (determined under section 401(a)(9)(C)(v) for the calendar year in which such taxable year begins)”.
(e) EFFECTIVE DATE.—The amendments made by this section shall apply to distributions required to be made after December 31, 2022, with respect to individuals who attain age 72 after such date.
H.R. 2954-117th Congress Securing a Strong Retirement Act (Secure 2.0 Section 106
AS 14.25.165,
G. RECOVERY OF RETIREMENT PLAN OVERPAYMENTS.
(a) OVERPAYMENTS UNDER INTERNAL REVENUE CODE OF 1986.—
(1) QUALIFICATION REQUIREMENTS.—Section 414 of the Internal Revenue Code of 1986, as amended by this preceding provisions of this Act, is amended by adding at the end the following new subsection:
“(aa) SPECIAL RULES APPLICABLE TO BENEFIT OVERPAYMENTS.—
“(1) IN GENERAL.—A plan shall not fail to be treated as described in clause (i), (ii), (iii), or (iv) of section 219(g)(5)(A) (and shall not fail to be treated as satisfying the requirements of section 401(a) or 403) merely because—
“(A) the plan fails to obtain payment from any participant, beneficiary, employer, plan sponsor, fiduciary, or other party on account of any inadvertent benefit overpayment made by the plan, or
“(B) the plan sponsor amends the plan to increase past or future benefit payments to affected participants and beneficiaries in order to adjust for prior inadvertent benefit overpayments.
“(2) REDUCTION IN FUTURE BENEFIT PAYMENTS AND RECOVERY FROM RESPONSIBLE PARTY.—Paragraph (1) shall not fail to apply to a plan merely because, after discovering a benefit overpayment, such plan—
“(A) reduces future benefit payments to the correct amount provided for under the terms of the plan, or
“(B) seeks recovery from the person or persons responsible for such overpayment.
“(3) EMPLOYER FUNDING OBLIGATIONS.—Nothing in this subsection shall relieve an employer of any obligation imposed on it to make contributions to a plan to meet the minimum funding standards under sections 412 and 430 or to prevent or restore an impermissible forfeiture in accordance with section 411.
“(4) OBSERVANCE OF BENEFIT LIMITATIONS.—Notwithstanding paragraph (1), a plan to which paragraph (1) applies shall observe any limitations imposed on it by section 401(a)(17) or 415. The plan may enforce such limitations using any method approved by the Secretary of the Treasury for recouping benefits previously paid or allocations previously made in excess of such limitations.
“(5) COORDINATION WITH OTHER QUALIFICATION REQUIREMENTS.—The Secretary of the Treasury may issue regulations or other guidance of general applicability specifying how benefit overpayments and their recoupment or non-recoupment from a participant or beneficiary shall be taken into account for purposes of satisfying any requirement applicable to a plan to which paragraph (1) applies.”.
(2) ROLLOVERS.—Section 402(c) of such Code is amended by adding at the end the following new paragraph:
“(12) In the case of an inadvertent benefit overpayment from a plan to which section 414(bb)(1) applies that is transferred to an eligible retirement plan by or on behalf of a participant or beneficiary—
“(A) the portion of such overpayment with respect to which recoupment is not sought on behalf of the plan shall be treated as having been paid in an eligible rollover distribution if the payment would have been an eligible rollover distribution but for being an overpayment, and
“(B) the portion of such overpayment with respect to which recoupment is sought on behalf of the plan shall be permitted to be returned to such plan and in such case shall be treated as an eligible rollover distribution transferred to such plan by the participant or beneficiary who received such overpayment (and the plans making and receiving such transfer shall be treated as permitting such transfer).
In any case in which recoupment is sought on behalf of the plan but is disputed by the participant or beneficiary who received such overpayment, such dispute shall be subject to the claims procedures of the plan that made such overpayment, such plan shall notify the plan receiving the rollover of such dispute, and the plan receiving the rollover shall retain such overpayment on behalf of the participant or beneficiary (and shall be entitled to treat such overpayment as plan assets) pending the outcome of such procedures.”.
(1) a good faith interpretation of then existing administrative guidance for inadvertent benefit overpayment recoupments and recoveries that commenced before the date of enactment of this Act, and
(2) determinations made before the date of enactment of this Act by the responsible plan fiduciary, in the exercise of its fiduciary discretion, not to seek recoupment or recovery of all or part of an inadvertent benefit overpayment.
In the case of a benefit overpayment that occurred prior to the December 31, 2023, any installment payments by the participant or beneficiary to the plan or any reduction in periodic benefit payments to the participant or beneficiary, which were made in recoupment of such overpayment and which commenced prior to such date, may continue after such date. Nothing in this subsection shall relieve a fiduciary from responsibility for an overpayment that resulted from a breach of its fiduciary duties.
H.R. 2954-117th Congress Securing a Strong Retirement Act (Secure 2.0 Section 301)
AS 14.25.173
H. UPDATING DOLLAR LIMIT FOR MANDATORY DISTRIBUTIONS.
(a) Certain mandatory distributions.—
(i) In general.—In case of a trust which is part of an eligible plan, such trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that if—
(I) a distribution described in clause (ii) in excess of $7,000 is made, and
(II) the distributee does not make an election under subparagraph (A) and does not elect to receive the distribution directly,
the plan administrator shall make such transfer to an individual retirement plan of a designated trustee or issuer and shall notify the distributee in writing (either separately or as part of the notice under section 402(f)) that the distribution may be transferred to another individual retirement plan.
(ii) Eligible plan.—
For purposes of clause (i), the term “eligible plan” means a plan which provides that any nonforfeitable accrued benefit for which the present value (as determined under section 411(a)(11)) does not exceed $7,000 shall be immediately distributed to the participant.
H.R. 2954-117th Congress Securing a Strong Retirement Act (Secure 2.0 Section 307)
AS 14.25.150
JUDICIAL RETIREMENT SYSTEM DEFINED BENEFIT PLAN
Subsection B. Distribution Requirements is amended as follows:
Notwithstanding any other provisions to the contrary, and pursuant to AS 39.35.370 and AS 39.35.371, the entire interest of a member must be distributed or begin to be distributed no later than the Employee’s required beginning date. If a plan member fails to apply for retirement benefits by April 1 of the calendar year following the calendar year in which he or she reaches [70-1/2 OR APRIL 1 OF THE CALENDAR YEAR FOLLOWING THE CALENDAR YEAR IIN WHICH HE OR SHE TERMINATES EMPLOYMENT, WHICHEVER IS LATER] 73 after December 31, 2022 and age 75 for an individual who attains age 74 after December 31, 2032, the plan will begin distributing the benefits as required by this section. Death benefits must be distributed in accordance with 26 U.S.C. 401(a)(9)(G) and the regulations implementing that section.
Section F. Corrections
Expansion of Employee Plans Compliance Resolution System. Because of the ever growing complexity of retirement plan administration, Section 305 expands the Employee Plans Compliance Resolution System (“EPCRS”) to (1) allow more types of errors to be corrected internally through self-correction, (2) apply to inadvertent IRA errors, and (3) exempt certain failures to make required minimum distributions from the otherwise applicable excise tax. For example, Section 305 allows for correction of many plan loan errors through self-correction, which are a frequent area of error and can be burdensome to correct a single loan error through the Internal Revenue Service. Section 305 is effective on the date of enactment of this Act. Any guidance or revision of guidance required by Section 305 shall be promulgated no later than 2 years after the date of enactment of this Act. Revenue Procedure 2021–30 (or any successor guidance) shall be updated to take into account the provisions of this section no later than 2 years after the date of enactment of this Act.
No Public Hearing will be held. You may comment on the proposed IRS compliance changes by submitting written comments to Mindy Voigt at P.O. Box 110203, 333 Willoughby Avenue, Juneau, Alaska 99811-0203, or by email at Mindy.Voigt@alaska.gov. You may also call Mindy Voigt at (907) 465-5717. Comments may also be submitted through the Alaska Online Public Notice System by accessing this notice on the system and using the comment link. Comments must be received no later than 5:00p.m. on June 30, 2024.
If you are a person with a disability who needs a special accommodation to participate in this process, please contact Mindy Voigt at (907) 465-5717 no later than Monday, June 10, 2024 to ensure any necessary accommodations can be provided.
A copy of the proposed regulation changes and of material to be adopted by reference is available on the Alaska Online Public Notice System, the Division of Retirement and Benefits website at drb.alaska.gov, and by contacting Mindy Voigt at P.O. Box 110203, 333 Willoughby Avenue, Juneau, Alaska 99811-0203 or by email at Mindy.Voigt@alaska.gov.
After the public comment period ends, the Division of Retirement and Benefits will either adopt the proposed regulation changes or other provisions dealing with the same subject, without further notice, or decide to take no action. The language of the final regulations may be different from that of the proposed regulations. You should comment during the time allowed if your interests could be affected.
Statutory Authority: N/A
Statutes Being Implemented, Interpreted, or Made Specific: N/A
Fiscal Information: No increased appropriations are anticipated.
The Division of Retirement and Benefits (DRB) keeps a list of individuals and organizations interested in its regulations. Those on the list will automatically be sent a copy of all DRB notices of proposed regulation changes. To be added to or removed from the list, send a request to the DRB at doa.drb@alaska.gov, giving your name and either your email address or mailing address, as you prefer, for receiving notices.
Date: May 29, 2024
__________________________________________
Kathy Lea, Deputy Director/Chief Pension Officer