| (a) The Act provides that retirement benefits commence
upon retirement, and §851.001(11) of the Act provides that retirement
requires a "withdrawal from service". The Internal Revenue Code and
regulations thereunder require that the terms of the plan be followed
and define termination of employment for the similar rule that under
a pension plan, such as TMRS, benefits cannot commence prior to the
earlier of termination of employment or normal retirement age (if
the plan allows in-service distributions prior to normal retirement
age, which the Act does not). In order to satisfy applicable requirements
of the Act and the Internal Revenue Code and guidance thereunder,
for purposes of allowing a distribution of benefits to a member, a
member must have a bona fide termination of employment with all applicable
participating municipalities. A distribution of benefits to a member
before there has been such a bona fide termination of employment would
be an in-service distribution and an operational error which could
lead to a plan disqualification under the Internal Revenue Code and
could result in the assessment of taxes, back taxes, interest and
penalties against the participating municipality or municipalities
and its participants unless corrected.
(b) Whether a termination of employment is a bona fide
termination is dependent on the facts and circumstances surrounding
the termination.
(c) With respect to employees of a participating municipality,
a termination is not a bona fide termination of employment if there
has not been a complete termination and severance of the employer-employee
relationship. Failure to strictly follow the employer's termination
policies, practices, processes and procedures regularly followed by
the employer indicates that the termination was not bona fide.
(d) Notwithstanding strict adherence to the participating
municipality's regular employment termination polices, practices,
processes and procedures or any other facts and circumstances, a termination
is not a bona fide termination of employment if at the time of termination
there is an expectation, understanding, agreement, or pre-arrangement,
whether written or oral, express or implied, between the municipality
and employee, or an agent of either, that the termination is or will
be temporary or that the person will be rehired in the future, whether
such rehire is:
(1) for the same position or a different position;
(2) at a greater, lesser, or equivalent level of compensation;
(3) in the same or any other division or department
of the employer;
(4) as a full-time, part-time or temporary employee;
or
(5) as an independent contractor, whether directly
or through an entity.
(e) If a member applies for a withdrawal or refund
of the member's accumulated contributions under the Act, but the system
determines, in its discretion, that there was not a bona fide termination
of employment or that the member is or has become an employee of another
participating municipality before the refund payment has been issued,
the system may cancel the refund application.
(f) If a member applies for retirement but, before
payment of the retirement benefit begins, the system determines, in
its discretion, that there was not a bona fide termination of employment
or that the member became an employee of another participating municipality
before the member's effective retirement date, the system may cancel
the retirement application.
(g) If the system determines, in its discretion, that
a person who has retired with a service retirement benefit under the
Act is performing or providing services as a purported independent
contractor for the person's reemploying municipality and that there
was no bona fide termination of employment before the person began
performing or providing such services, then:
(1) the system may promptly suspend the person's service
retirement annuity payments in accordance with §852.108 of the
Act; and
(2) the system may require the person to repay, with
earnings or interest, all amounts paid by the system with regard to
such service retirement benefit from the effective date of retirement
through the date of suspension, or may adjust any future payments
of the annuity so that the actuarial equivalent of the benefit to
which the person is entitled is paid, or may require a combination
of repayment by the member and adjustment of future payments.
(h) If the system determines, in its discretion, that
a person who purports to be an independent contractor may in fact
be a common law employee, the system may require the person to provide
such information regarding the independent contractor status of the
individual as it may deem necessary or advisable to make such determination,
which may include, but not be limited to, a filing of an IRS Form
SS-8 by the person or the municipality, which shall be subject to
review and approval by the system before filing.
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