wa-26-21-085: Retirement Systems, Department of — WSR 26-21-085

WSR 26-21-085 (26-21)WSR 26-21-085PROPOSED RULESDEPARTMENT OFRETIREMENT SYSTEMS[Filed October 20, 2026, 4:41 p.m.]Original Notice.Preproposal statement of inquiry was filed as WSR 26-15-070.Title of Rule and Other Identifying Information: Incorporating certain federal requirements.Hearing Location(s): On December 3, 2026, at 2:00 p.m., via Microsoft Teams, Meeting ID 294 328 899 996 145, Passcode vn3mC2tM; or Phone 833-322-1218, Code 701 034 035#. See https://www.drs.wa.gov/sitemap/rules/#proposed-rule-hearings for details.Date of Intended Adoption: December 10, 2026.Submit Written Comments to: Bianca Stoner, Department of Retirement Systems (DRS), P.O. Box 48380, Olympia, WA 98504-8380, email drs.rules@drs.wa.gov, beginning November 2, 2026, 8:00 a.m., by December 2, 2026, 5:00 p.m.Assistance for Persons with Disabilities: Contact Bianca Stoner, phone 360-664-7291, TTY 711, email drs.rules@drs.wa.gov, by December 2, 2026.Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: DRS is undertaking rule making to expressly incorporate certain federal requirements from the SECURE and PATH acts into its general rules.Reasons Supporting Proposal: To expressly incorporate certain federal requirements in DRS's general rules. Statutory Authority for Adoption: RCW 41.50.050, SECURE Act of 2019 (P.L. 116-94), SECURE Act 2.0 of 2022 (P.L. 117-328), and PATH Act of 2015 (P.L. 114-113). Statute Being Implemented: SECURE Act of 2019 (P.L. 116-94), SECURE Act 2.0 of 2022 (P.L. 117-328), and PATH Act of 2015 (P.L. 114-113).Rule is necessary because of federal law, SECURE Act of 2019 (P.L. 116-94), SECURE Act 2.0 of 2022 (P.L. 117-328), and PATH Act of 2015 (P.L. 114-113).Name of Proponent: DRS, governmental.Name of Agency Personnel Responsible for Drafting, Implementation, and Enforcement: Seth Miller, DRS, P.O. Box 48380, Olympia, WA 98504-8380, 360-664-7304.A school district fiscal impact statement is not required under RCW 28A.305.135.A cost-benefit analysis is not required under RCW 34.05.328. RCW 34.05.328 (5)(a)(i) does not apply to this proposed rule, and DRS is not voluntarily making it applicable.This rule proposal, or portions of the proposal, is exempt from requirements of the Regulatory Fairness Act because the proposal: Is exempt under RCW 19.85.025(4).Explanation of exemptions: Rules from DRS only affect members and beneficiaries of the state retirement systems and participating public employers. As a result, the rules do not affect small businesses.Scope of exemption for rule proposal:Is fully exempt.October 20, 2026Bianca StonerRules CoordinatorRDS-7338.2AMENDATORY SECTION(Amending WSR 21-22-048, filed 10/28/21, effective 11/28/21)WAC 415-02-750How does the department comply with Internal Revenue Code distribution rules?(1) All benefits paid from the retirement plan shall be distributed in accordance with a reasonable and good faith interpretation of the requirements of section 401 (a)(9) of the Internal Revenue Code, as applicable to a governmental plan within the meaning of section 414(d) of the Internal Revenue Code. In order to meet these requirements, the retirement plan shall be administered in accordance with the following provisions:(a) If a plan member separates from service prior to attaining eligibility for a future benefit and the balance of the member's accumulated contributions is less than $1,000, the department may initiate a refund of the member's accumulated contributions following written notification to the member.(i) A refund of the accumulated contributions initiated by the department under the terms of this section shall terminate all rights to benefits in the retirement plan.(ii) If the member is reemployed in an eligible position, service credits earned prior to the refund may be restored upon repayment according to the provisions of the plan.(b) Distribution of a member's benefit must begin by the later of April 1st following the calendar year in which a member attains the applicable age ((seventy and one-half)) or April 1st of the year following the calendar year in which the member retires((;)). Applicable age shall mean:(i) In the case of a member born before July 1, 1949, the applicable age is 70 1/2;(ii) In the case of a member born on or after July 1, 1949, and before January 1, 1951, the applicable age is 72;(iii) In the case of a member born on or after January 1, 1951, and before January 1, 1960, the applicable age is 73;(iv) In the case of a member born on or after January 1, 1960, the applicable age is 75; or(v) The age set forth in section 401 (a)(9)(C)(v) of the Internal Revenue Code, as amended from time to time.(c) Unless distributed in a lump sum, the member's entire interest must be distributed over the member's life or the lives of the member and a designated beneficiary, or over a period not extending beyond the life expectancy of the member or of the member and designated beneficiary;(d) If the member's surviving spouse is the member's sole designated beneficiary and the surviving spouse dies after the member but before distributions to the surviving spouse begin, this section, other than (a) of this subsection, will apply as if the surviving spouse were the member, as described in Treasury Regulation § 1.401 (a)(9)-3(e).(e) The life expectancy of a member or the member's spouse or beneficiary may not be recalculated after the benefits commence;(((e)))(f) If a member dies before the required distribution of the member's benefits has begun, the member's entire interest must be either:(i) Distributed (in accordance with federal regulations) over the life or life expectancy of the designated beneficiary, with the distributions beginning no later than December 31st of the calendar year following the calendar year of the member's death; or(ii) ((Distributed within five years))In the case of a lump sum payment, or if there is no designated beneficiary as of September 30th of the year following the year of the participant's death, distributed by December 31st of the calendar year containing the fifth anniversary of the member's death.(((f)))(g) The amount of an annuity paid to a member's beneficiary may not exceed the maximum determined under the incidental death benefit requirement of section 401 (a)(9)(G) of the Internal Revenue Code, and the minimum distribution incidental benefit rule under Treasury Regulation section 1.401 (a)(9)-6((, Q&A 2))(b); and(((g)))(h) If a member dies after the distribution of the member's benefits has begun, the remaining portion of the member's interest will be distributed at least as rapidly as under the method of distribution being used for the member as of the date of the member's death.(2) The retirement system pursuant to a valid dissolution order as defined in RCW 41.50.500 may establish separate benefits for a member and nonmember.(3) The death and disability benefits provided by the plan are limited by the incidental benefit rule set forth in section 401 (a)(9)(G) of the Internal Revenue Code and Treasury Regulation section 1.401-1 (b)(1)(i) or any successor regulation thereto. As a result, the total death or disability benefits payable may not exceed ((twenty-five))25 percent of the cost for all of the members' benefits received from the plan.AMENDATORY SECTION(Amending WSR 12-21-036, filed 10/10/12, effective 11/10/12)WAC 415-02-751How does the department comply with Internal Revenue Code rollover rules?(1) A distributee may elect to have eligible rollover distributions paid in a direct rollover to an eligible retirement plan the distributee specifies, pursuant to section 401 (a)(31) of the federal Internal Revenue Code.(2) "Eligible rollover distribution" means any distribution of all or any portion of the balance to the distributee with the following exceptions:(a) Any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or the 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 section 401 (a)(9) of the Internal Revenue Code;(c) The portion of any distribution that is not includible in gross income; and(d) Any other distribution that is reasonably expected to total less than ((two hundred dollars))$200 during the year.Effective January 1, 2002, a portion of a distribution will not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions that are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in section 408 (a) or (b) of the Internal Revenue Code, or to a qualified defined contribution plan described in section 401(a) of the Internal Revenue Code, that agrees to separately account for amounts so transferred (and earnings thereon), including separately accounting for the portion of the distribution that is includible in gross income and the portion of the distribution that is not so includible, or on or after January 1, 2007, to a qualified defined benefit plan described in section 401(a) of the Internal Revenue Code or to an annuity contract described in section 403(b) of the Internal Revenue Code, that agrees to separately account for amounts so transferred (and earnings thereon), including separately accounting for the portion of the distribution that is includible in gross income and the portion of the distribution that is not so includible.Effective January 1, 2002, the definition of eligible rollover distribution also includes a distribution to a surviving spouse, or to a spouse or former spouse who is an alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Internal Revenue Code.(3) "Eligible retirement plan" means any of the following that accepts the distributee's eligible rollover distribution:(a) An individual retirement account described in section 408(a) of the Internal Revenue Code;(b) An individual retirement annuity described in section 408(b) of the Internal Revenue Code;(c) An annuity plan described in section 403(a) of the Internal Revenue Code;(d) A qualified trust described in section 401(a) of the Internal Revenue Code;(e) Effective January 1, 2002, an annuity contract described in section 403(b) of the Internal Revenue Code;(f) Effective January 1, 2002, a plan eligible under section 457(b) of the Internal Revenue Code that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or a political subdivision of a state that agrees to separately account for amounts transferred into such 457(b) plan from this plan; or(g) Effective January 1, 2008, a Roth IRA described in section 408A of the Internal Revenue Code.(h) Effective December 18, 2015, a SIMPLE IRA as described in section 408(p) of the Internal Revenue Code, provided that the rollover contribution is made after the two-year period beginning on the date the distributee first participated in any qualified salary reduction arrangement maintained by the distributee's employer under section 408 (p)(2) of the Internal Revenue Code, as described in Internal Revenue Code section 72 (t)(6).(4) "Distributee" means an employee or former employee. It also includes 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 section 414(p) of the Internal Revenue Code. Effective January 1, 2007, a distributee further includes a nonspouse beneficiary who is a designated beneficiary as defined by section 401 (a)(9)(E) of the Internal Revenue Code. However, a nonspouse beneficiary may rollover the distribution only to an individual retirement account or individual retirement annuity established for the purpose of receiving the distribution, and the account or annuity will be treated as an "inherited" individual retirement account or annuity.(5) "Direct rollover" means a payment by the plan to the eligible retirement plan specified by the distributee.