Title 22 — Subtitle 07. Compliance With the Internal Revenue Code

“Agency” means the State Retirement Agency.

“Board” means the Board of Trustees for the State Retirement and Pension System.

“Internal Revenue Code” or “Code” means the Internal Revenue Code of 1986, as amended.

“Limitation year” means the plan year for Code Section 415 testing purposes.

“Plan year” means the fiscal year commencing July 1.

“Required beginning date” means the applicable date by which the distribution of a plan benefit must commence in accordance with the Internal Revenue Code, 26 U.S.C. §401(a)(9)(C).

“State system” refers to any State system identified in State Personnel and Pensions Article, §21-102, Annotated Code of Maryland, administered by the State Retirement Agency, and operated in accordance with the Internal Revenue Code, 26 U.S.C. §§401(a) and 414(d).

Distribution of a member's benefit shall begin by the required beginning date;

The member's entire interest shall be distributed over the member's life, or the lives of the member and a beneficiary determined pursuant to the applicable provisions of the State system;

If a member dies after the required distribution of benefits has begun, the remaining portion of the member's interest, if any, shall be distributed at least as rapidly as under the method of distribution before the member's death;

If a member dies before the required distribution of the member's benefits has begun, the member's entire interest shall be distributed to the beneficiary, if the beneficiary can be located:

The amount of an annuity paid to a member's beneficiary may not exceed the maximum determined under the incidental death benefit requirement of §401(a)(9)(G) of the Internal Revenue Code;

The death and disability benefits provided by the State system are limited by the incidental benefit rule set forth in §401(a)(9)(G) of the Internal Revenue Code and U.S. Treasury regulation 26 C.F.R. §1.401-1(b)(1)(i) (as amended), so that the total death or disability benefits payable do not exceed 25 percent of the cost for all of the members' benefits received from the State system;

If a member or beneficiary cannot be located by the required beginning date, the member's or beneficiary's benefit will be initiated by the Agency and immediately shall be suspended, pending the Agency locating the member or beneficiary; and

In order to maintain compliance with §401(a)(9) of the Internal Revenue Code, the provisions of State Personnel and Pensions Article, §21-402(c), Annotated Code of Maryland, shall be applied by the Agency to a member's request to change a beneficiary on and after January 1, 2006.

Effective with respect to plan years beginning on and after July 1, 2002, the annual compensation of a plan member which exceeds $200,000, as adjusted for cost-of-living increases in accordance with §401(a)(17)(B) of the Internal Revenue Code, may not be taken into account in determining benefits or contributions due for any plan year.

Annual compensation means compensation during the plan year or such other consecutive 12-month period over which compensation is otherwise determined under the plan (the determination period).

The cost-of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year.

If the determination period consists of fewer than 12 months, the annual compensation limit is an amount equal to the otherwise applicable annual compensation limit multiplied by a fraction, the numerator of which is the number of months in the short determination period, and the denominator of which is 12.

If the compensation for any prior determination period is taken into account in determining a plan member's contributions or benefits for the current plan year, the compensation for such prior determination period is subject to the applicable annual compensation limit in effect for that prior period.

In this section, “eligible member” means, a person who first became a member of the State system prior to the plan year beginning after December 31, 1995.

Pursuant to section 13212(d)(3)(A) of Omnibus Budget and Reconciliation Act of 1993, and the regulations issued under that section, eligible members are not subject to the limits of §401(a)(17) of the Internal Revenue Code, and the maximum compensation used in computing employee and employer contributions to, or benefits due from, the State system for eligible members shall be the maximum amount allowed by the State system to be so used on July 1, 1993.

The limits referenced in §§A and B of this regulation apply only to years beginning after December 31, 1995, and only to individuals who first become plan members in plan years beginning on and after July 1, 1996.

The annual benefit to which a member is entitled, during the limitation year (fiscal year), is limited to $160,000, as adjusted for cost-of-living increases under §415(d) of the Internal Revenue Code.

For certain members, this limit is adjusted based upon the age of the member at retirement if the member retires before 62 years old.

The limitation is not lowered for qualified police and firefighters as defined by the Internal Revenue Code.

The limitation is not lowered for a member who retires on disability or for a death benefit.

In this regulation, the following terms have the meanings indicated.

Terms Defined.

To elect to have all or any part of an eligible rollover distribution paid to an eligible retirement plan in a direct rollover, a participant shall properly complete the appropriate form that the Retirement Agency provides and file it with the Retirement Agency.

A form to request a rollover is properly completed if it is completed, dated, and signed in accordance with the form’s instructions.