(a) A distributee may elect, at the time and in the
manner prescribed by the Board of Trustees, 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) The terms "eligible rollover distribution" and
"eligible retirement plan" are defined as follows:
(1) An "eligible rollover distribution" is 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 the
following:
(A) any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for
the life (or 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 ten (10) years
or more;
(B) any distribution to the extent such distribution
is required under §401(a)(9) of the Internal Revenue Code of
1986, as amended from time to time (the "Internal Revenue Code");
or
(C) the portion of any distribution that is not includible
in gross income.
(2) An "eligible retirement plan" includes:
(A) an individual retirement account described in Internal
Revenue Code §408(a);
(B) an individual retirement annuity described in Internal
Revenue Code §408(b);
(C) an annuity plan described in Internal Revenue Code §403(a);
(D) a qualified trust described in Internal Revenue
Code §401(a) that accepts the distributee's eligible rollover
distribution;
(E) an annuity contract described in Internal Revenue
Code §403(b);
(F) an eligible plan under Internal Revenue Code §457(b),
which is maintained by a state, political subdivision of a state,
or any agency or instrumentality of a state or political subdivision
of a state and which agrees to separately account for amounts transferred
into such plan from this plan; or
(G) for distributions made after December 31, 2007,
a Roth IRA as described in Internal Revenue Code §408A(b).
(3) The definition of eligible retirement plan also
shall apply in the case of a distribution to a surviving spouse, or
to a spouse or former spouse who is the alternate payee under a qualified
domestic relations order as defined in Internal Revenue Code §414(p).
(4) A "distributee" includes an employee or former
employee. In addition, 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 Internal Revenue Code §414(p), are distributees
with regard to the interest of the spouse or former spouse.
(5) A "direct rollover" is a payment by the plan to
the eligible retirement plan specified by the distributee.
(c) Notwithstanding anything in this section to the
contrary, a portion of a distribution shall not fail to be an eligible
rollover distribution merely because the portion consists of after-tax
contributions which are not includible in gross income. However, such
portion may be paid only in a direct trustee-to-trustee transfer to
an individual retirement account or annuity described in Internal
Revenue Code §§408(a) or (b), or to a qualified defined
contribution plan described in Internal Revenue Code §401(a)
or an Internal Revenue Code §403(b) annuity contract that, in
each case, agrees to separately account for amounts so transferred,
and the earnings on these amounts, including separate accounting for
the portion of such distribution which was includible in gross income
(if not for the rollover exclusion) and the portion of such distribution
which was not includible in income (determined without regard to the
rollover exclusion). Without limiting the foregoing, for distributions
made after December 31, 2006, such portion may be also be paid in
a direct trustee-to-trustee transfer to any type of qualified plan
described in Internal Revenue Code §401(a) (whether or not a
defined contribution plan) that agrees to separately account for amounts
so transferred, and the earnings on these amounts, including separate
accounting for the portion of such distribution which was includible
in gross income (if not for the rollover exclusion) and the portion
of such distribution which was not includible in income (determined
without regard to the rollover exclusion). Without limiting the foregoing,
for distributions made after December 31, 2007, a portion of a distribution
shall not fail to be an eligible rollover distribution merely because
it is paid in a direct trustee-to-trustee transfer to a Roth IRA as
described in Internal Revenue Code §408A(b).
(d) Rollovers by Nonspouse Beneficiaries. Effective
for distributions on or after January 1, 2010, a member's beneficiary
who is not the surviving spouse of the deceased member may elect to
have an eligible rollover distribution paid directly to an eligible
retirement plan that is an inherited individual retirement account
described in Internal Revenue Code §408(d)(3)(C) to the extent
permitted by Internal Revenue Code §402(c)(11).
(e) The Board, the system and its employees and agents
are not responsible for assuring that the distributee is eligible
to make a rollover or for the tax consequences of any such rollover.
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