(a) Benefits of participation. The plan administrator shall cease to accept deferrals to investment products approved under the prior plan, with exception of life insurance products on or after September 1, 2000. Subject to any changes in federal law:
(1) a participant's deferrals are not subject to federal income taxation until the deferrals are paid or otherwise made available to the participant; and
(2) investment income is not subject to federal income taxation until it is paid or otherwise made available to the participant.
(b) Enrollment of participants in the plan.
(1) An employee may complete an enrollment form, enroll online or enroll through customer service representative at the TPA in the revised plan.
(2) If a participant has not selected an investment product to receive deferrals, the deferrals shall be invested in a product selected by the plan administrator at its sole discretion.
(c) Effective date of enrollment. A participant's enrollment in the Plan is effective for compensation earned beginning with the month following the month in which the participant enrolls.
(d) Eligibility. Employees are eligible to participate in the plan and defer compensation immediately upon becoming employed by a state agency. Employees of community colleges and junior colleges are eligible only if such community college or junior college has opted to participate in the Texa$aver 457 plan.
(e) Contents of a participation agreement used in the prior plan. A participation agreement must contain but shall not be limited to:
(1) the participant's consent for payroll deductions equal to the amount of deferrals during each pay period;
(2) the amount that will be deducted from the participant's compensation during each pay period;
(3) the prior plan vendor and qualified investment product in which the participant's deferrals will be invested;
(4) the date on which the payroll deductions will begin or end, as appropriate;
(5) the signature of an individual with authority to bind the prior plan vendor;
(6) the signature of an individual with authority to bind the participant; and
(7) an incorporation by reference of the requirements of state law and the sections in this chapter.
(f) Participants with existing life insurance products.
(1) This paragraph is effective until December 31, 1998. When a participant has deferrals and investment income in a life insurance product, the state of Texas:
(2) This paragraph is effective January 1, 1999, and thereafter. When a participant has deferrals and investment income in a life insurance product, the life insurance product shall be held in trust for the exclusive benefit of the participant and beneficiaries.
(g) Normal maximum amount of deferrals.
(1) The amount a participant defers during each tax year may not exceed the normal maximum amount of deferrals.
(2) The normal maximum amount of deferrals is the maximum amount allowed by the Internal Revenue Service (as periodically adjusted for cost-of-living in accordance with Code §457(e)(15)), §415(d), the Job Creation and Worker Assistance Act of 2002 and the Pension Protection Act of 2006, or 100% of a participant's includible compensation.
(3) The participant's employing agency will monitor the annual deferral limits for each plan participant to ensure the maximum annual deferral limit is within the maximum amount allowed by the Internal Revenue Service or 100% of a participant's includible income is not exceeded. Any state agency or employing agency that is uncertain what the appropriate maximum annual deferral limit is for a calendar year should contact the plan administrator to obtain that information. Each participant enrolling in the plan must provide the employing state agency any information necessary to ensure compliance with plan requirements, including, without limitation, whether the employee is a participant in any other eligible plan. If a participant makes deferrals in excess of the normal maximum annual deferral limit and is not participating under the catch-up provision, the following actions will be taken:
(4) If any deferral (or any portion of a deferral) is made to the plan by a good faith mistake of fact, then within one year after the payment of the deferral, and upon receipt in good order of a proper request approved by the plan administrator, the amount of the mistaken deferral (adjusted for any income or loss in value, if any, allocable thereto) shall be returned directly to the participant or, to the extent required or permitted by the plan administrator, to the participant's employing state agency.
(5) Disregard excess deferral. A participant is treated as not having deferred compensation under a plan for a prior taxable year to the extent excess deferrals under the plan are distributed, as described in paragraph (4) of this subsection. To the extent that the combined deferrals for pre-2002 years exceeded the maximum deferral limitations, the amount is treated as an excess deferral for those prior years.
(h) Three-year catch-up exception to the normal maximum amount of deferrals.
(1) This subsection provides a limited exception to the normal maximum amount of deferrals.
(2) In the event that a participant chooses to begin the three-year catch-up option, the participant is required to complete and provide the plan administrator with a copy of the three-year catch-up provision agreement form.
(3) In this subsection, the term "normal retirement age" for any participant means a range of ages:
(4) If a participant works beyond age 70.5, the normal retirement age for the participant is the age designated by the participant, which, in this instance, may not be later than the participant's separation from service.
(5) For any or all of the last three full taxable years ending before the taxable year in which a participant attains normal retirement age, the maximum amount that the participant may defer for each tax year is the lesser of:
(6) The participant's employing agency will calculate and monitor all three-year catch-up limits and furnish the plan administrator with the applicable three-year catch-up forms. If a participant makes deferrals in excess of the participant's three-year catch-up limit, the following actions will be taken.
(7) This subsection applies only if the participant has not previously used the three-year catch-up exception with respect to a different normal retirement age under the plan or another deferred compensation plan governed by the Code §457.
(8) If a participant makes deferrals in excess of the normal plan limits under the three-year catch-up provision during or after the calendar year in which the participant reaches normal retirement age, the following actions will be taken.
(9) Over age 50 catch-up. A participant age 50 or older during any calendar year shall be eligible to make additional pre-tax contributions in accordance with Code §414(v) applicable to 457 plans, in excess of normal deferral amounts. A participant may make an additional contribution over and above the applicable deferral limit. The additional contribution is $5,000 for 2006. After 2006, the amount of the "Over age 50 and over catch-up" will be indexed in $500 increments based upon cost-of-living adjustments. A participant who elects to defer contributions under the normal three-year catch-up provisions may not also defer under the special Over age 50 catch-up and Code §414(v) and §457.
(10) Special post severance compensation under Code §415 effective January 1, 2007. A participant may elect to defer compensation paid within 2 1/2 months following separation from service in accordance with Code §415. Types of compensation include:
(i) Changes before a participant becomes entitled to a distribution.
(1) A participant may change the amount of deferral at any time.
(2) A participant must execute a change agreement for the prior 457 Plan funds and file the agreement with the participant's benefits coordinator when the participant:
(3) Upon receipt of a participation agreement or change agreement, the benefits coordinator shall review the agreement to determine whether it complies with the sections in this chapter.
(4) This paragraph applies to changes of beneficiaries, changes of the prior plan vendor or qualified investment product that receives a participant's deferrals, and changes to the amount a participant defers per pay period. An executed change agreement or participation agreement is effective beginning with the month following the month in which the benefits coordinator receives the agreement from the participant.
(5) This paragraph applies to transfers. An executed change agreement is effective on the date that the transfer procedures specified in §87.15 of this title (relating to Transfers) have been completed.
(j) Conflict in beneficiary designations. The designation of a primary or secondary beneficiary, or both, in a beneficiary designation form, participation agreement, change agreement, or distribution agreement prevails over a conflicting designation in any other document.
Cont'd...