§ 38–2021.26. Rollovers; purchase of service credit.

(a) An individual withdrawing a distribution under this part that constitutes an eligible rollover distribution within the meaning of section 402(c) of the Internal Revenue Code may elect, at the time and in the manner prescribed by the District of Columbia Retirement Board, and after receipt of proper notice, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan, within the meaning of section 402(c) of the Internal Revenue Code, in a direct rollover in accordance with section 401(a)(31) of the Internal Revenue Code. Any nontaxable distribution or portion thereof from a qualified plan may be directly rolled over tax-free to another qualified plan or a plan or annuity contract described in section 403(b) of the Internal Revenue Code, if separate accounting and other requirements are met pursuant to section 402(c)(2)(A) of the Internal Revenue Code.

(b) The Custodian of the Retirement Funds shall be entrusted with any transfer from another retirement plan for the purchase of service credit, including transfers allowed by sections 403(b) and 457 of the Internal Revenue Code of 1986. Before any transfer is received, the District of Columbia Retirement Board shall be presented with documentation sufficient to satisfy the provisions of the Internal Revenue Code of 1986 governing the substantiation of proposed transfers for the purchase of service credit.

(c)(1) The Custodian of the Retirement Funds shall also be entrusted with any rollover contribution from an eligible retirement plan, including:

(A) A qualified plan described in section 401(a) or 403(b) of the Internal Revenue Code of 1986, excluding after-tax employee contributions;

(B) An annuity contract described in section 403(b) of the Internal Revenue Code of 1986, excluding after-tax employee contributions;

(C) An eligible plan under section 457(b) of the Internal Revenue Code of 1986 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; or

(D) Amounts transferred from an individual retirement account or annuity described in section 408(a) or 408(b) of the Internal Revenue Code of 1986 that is eligible to be rolled over and would otherwise be includible in gross income.

(2) The rollover shall be separately accounted for as member contributions that were not previously taxed. Before any rollover is received, the District of Columbia Retirement Board shall be presented with documentation sufficient to satisfy the provisions of the Internal Revenue Code of 1986 governing the substantiation of proposed rollover contributions. The rollover shall be used to purchase service credit in addition to the service credit provided under the provisions of this part.

(d) The District of Columbia Retirement Board shall administer this part in the manner required to satisfy the applicable qualification requirements for a qualified governmental plan pursuant to the Internal Revenue Code of 1986. If a conflict should arise with a qualification requirement, the provision shall be interpreted in favor of maintaining the federal qualification requirements. The District of Columbia Retirement Board may adopt rules to implement this section.

(e) For the purposes of this section, the term:

(1) “Direct rollover” means a payment to the eligible retirement plan specified by the distributee described in section 402(e)(6) of the Internal Revenue Code.

(2) “Distributee” means a teacher or former teacher. In addition, the teacher’ or former teacher’s surviving spouse is a distributee with regard to the interest of the spouse or former spouse. A nonspouse beneficiary of a deceased teacher is also a distributee for purposes of this section; provided, that, in the case of a nonspouse beneficiary, the direct rollover may be made only to an individual retirement account or annuity under section 408 of the Internal Revenue Code that is established on behalf of the nonspouse beneficiary and that will be treated as an inherited IRA pursuant to the provisions of section 402(c)(11) of the Internal Revenue Code. The determination of the extent to which a distribution to a nonspouse beneficiary is required under section 401(a)(9) of the Internal Revenue Code shall be made in accordance with IRS Notice 2007-7, Q&A 17 and 18, 2007-5 I.R.B. 395.

(3) “Eligible retirement plan” means:

(A) An individual retirement account described in section 408(a) of the Internal Revenue Code, including a Roth IRA described in section 408A of the Internal Revenue Code;

(B) An individual retirement annuity described in section 408(b) of the Internal Revenue Code, including a Roth IRA described in section 408A of the Internal Revenue Code;

(C) A qualified trust described in section 401(a) of the Internal Revenue Code or an annuity plan described in section 403(a) of the Internal Revenue Code that accepts the distributee’s eligible rollover distribution;

(D) An annuity contract described in section 403(b) of the Internal Revenue Code that accepts the distributee’s eligible rollover distribution; and

(E) An eligible plan described in section 457(b) of the Internal Revenue Code which is maintained by a state, political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state, that accepts the distributee’s eligible rollover distribution and agrees to account separately for amounts transferred into such plan from the arrangement described under this part. The foregoing definition of eligible retirement plan shall also 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 domestic relations order.

(4) “Eligible rollover distribution,” within the meaning of section 402(c) of the Internal Revenue Code, means 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:

(A) A 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 10 years or more; and

(B) A distribution to the extent such distribution is required under section 401(a)(9) of the Internal Revenue Code. A distribution to a nonspouse beneficiary under section 401(f)(2)(A) of the Internal Revenue Code is an eligible rollover distribution. A portion of the distribution shall 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, the portion may be paid only to an individual retirement account or annuity described in section 408(a) or (b) of the Internal Revenue Code or to a qualified trust or annuity plan described in section 401(a) or 403(a) of the Internal Revenue Code or an annuity contract described in section 403(b) of the Internal Revenue Code if the trust or annuity plan or contract provides for separate accounting for amounts so transferred (and earnings thereon), including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

(Aug. 7, 1946, ch. 799, § 24; as added Oct. 1, 2002, D.C. Law 14-190, § 3702, 49 DCR 6968; Mar. 13, 2004, D.C. Law 15-105, § 71, 51 DCR 881; Apr. 13, 2005, D.C. Law 15-354, § 55(h), 52 DCR 2638; renumbered as § 25 [26], May 1, 2013, D.C. Law 19-312, § 2(m), 60 DCR 3434.)

Prior Codifications

2001 Ed., § 38-2021.24.

Section References

This section is referenced in § 38-2021.24.

Effect of Amendments

D.C. Law 15-105 validated a previously made technical correction.

D.C. Law 15-354 substituted “District of Columbia Retirement Board” for “Mayor”.

The 2013 amendment by D.C. Law 19-312 renumbered § 24 of the Act of Aug. 7, 1946, ch. 799, as § 25; rewrote (a); added “an eligible retirement plan, including” in the introductory language of (c); substituted “shall administer this part” for “shall administer the plan” in (d); and added (e).

Emergency Legislation

For temporary amendment of section, see § 2(l) of the Retirement of Public-School Teachers Omnibus Emergency Amendment Act of 2012 (D.C. Act 19-584, January 1, 2013, 60 DCR 134).

For temporary (90 days) amendment of this section, see § 2(m) of the Retirement of Public-School Teachers Omnibus Congressional Review Emergency Act of 2013 (D.C. Act 20-41, March 25, 2013, 60 DCR 5361, 20 DCSTAT 527).

Temporary Legislation

Section 2(m)(1) of D.C. Law 19-313 redesignated § 24 of the Act of Aug. 7, 1946, 60 Stat. 878, ch. 779, as § 25.

Section 2(m)(2) of D.C. Law 19-313 amended subsection (a) to read as follows:

“(a) An individual withdrawing a distribution under this act that constitutes an eligible rollover distribution within the meaning of section 402(c) of the Internal Revenue Code may elect, at the time and in the manner prescribed by the District of Columbia Retirement Board, and after receipt of proper notice, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan, within the meaning of section 402(c) of the Internal Revenue Code, in a direct rollover in accordance with section 401(a)(31) of the Internal Revenue Code. Any nontaxable distribution or portion thereof from a qualified plan may be directly rolled over tax-free to another qualified plan or a plan or annuity contract described in section 403(b) of the Internal Revenue Code, if separate accounting and other requirements are met pursuant to section 402(c)(2)(A) of the Internal Revenue Code.”

Section 2(m)(3) of D.C. Law 19-313 amended subsection (c) by striking the phrase “contribution from:” in the lead-in language and inserting the phrase “contribution from an eligible retirement plan, including:” in its place.

Section 2(m)(4) of D.C. Law 19-313 amended subsection (d) by striking the phrase “shall administer the plan” and inserting the phrase “shall administer this act and the associated acts” in its place.

Section 2(m)(5) of D.C. Law 19-313 added a new subsection (e) to read as follows:

“(e) For the purposes of this section, the term:

“(1) ‘Direct rollover’ means a payment to the eligible retirement plan specified by the distributee described in section 402(e)(6) of the Internal Revenue Code.

“(2) ‘Distributee’ means a teacher or former teacher. In addition, the teacher’ or former teacher’s surviving spouse is a distributee with regard to the interest of the spouse or former spouse. A nonspouse beneficiary of a deceased teacher is also a distributee for purposes of this section; provided, that, in the case of a nonspouse beneficiary, the direct rollover may be made only to an individual retirement account or annuity under section 408 of the Internal Revenue Code that is established on behalf of the nonspouse beneficiary and that will be treated as an inherited IRA pursuant to the provisions of section 402(c)(11) of the Internal Revenue Code. The determination of the extent to which a distribution to a nonspouse beneficiary is required under section 401(a)(9) of the Internal Revenue Code shall be made in accordance with IRS Notice 2007-7, Q 17 and 18, 2007-5 I.R.B. 395.

“(3) ‘Eligible retirement plan’ means:

“(A) An individual retirement account described in section 408(a) of the Internal Revenue Code, including a Roth IRA described in section 408A of the Internal Revenue Code;

“(B) An individual retirement annuity described in section 408(b) of the Internal Revenue Code, including a Roth IRA described in section 408A of the Internal Revenue Code;

“(C) A qualified trust described in section 401(a) of the Internal Revenue Code or an annuity plan described in section 403(a) of the Internal Revenue Code that accepts the distributee’s eligible rollover distribution;

“(D) An annuity contract described in section 403(b) of the Internal Revenue Code that accepts the distributee’s eligible rollover distribution; and

“(E) An eligible plan described in section 457(b) of the Internal Revenue Code which is maintained by a state, political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state, that accepts the distributee’s eligible rollover distribution and agrees to account separately for amounts transferred into such plan from the arrangement described under this act. The foregoing definition of eligible retirement plan shall also 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 domestic relations order.

“(4) ‘Eligible rollover distribution,’ within the meaning of section 402(c) of the Internal Revenue Code, means 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:

“(A) A 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 10 years or more; and

“(B) A distribution to the extent such distribution is required under section 401(a)(9) of the Internal Revenue Code. A distribution to a nonspouse beneficiary under section 401(f)(2)(A) of the Internal Revenue Code is an eligible rollover distribution. A portion of the distribution shall 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, the portion may be paid only to an individual retirement account or annuity described in section 408(a) or (b) of the Internal Revenue Code or to a qualified trust or annuity plan described in section 401(a) or 403(a) of the Internal Revenue Code or an annuity contract described in section 403(b) of the Internal Revenue Code if the trust or annuity plan or contract provides for separate accounting for amounts so transferred (and earnings thereon), including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.”

Section 4(b) of D.C. Law 19-313 provided that the act shall expire after 225 days of its having taken effect.

Short Title

Short title of subtitle A of title XXXVII of Law 14-190: Section 3701 of D.C. Law 14-190 provided that subtitle A of title XXXVII of the act may be cited as the Teachers Retirement Consolidation Amendment Act of 2002.

References in Text

Section 403(b) of the Internal Revenue Code of 1986, referred to in subsecs. (b) and (c), is codified as 26 U.S.C. § 403(b).

Section 457 of the Internal Revenue Code of 1986, referred to in subsecs. (b) and (c)(1)(C), is codified as 26 U.S.C. § 457.

Section 401(a) of the Internal Revenue Code of 1986, referred to in subsec. (c)(1)(A), is codified as 26 U.S.C. § 401(a).

Section 403(b) of the Internal Revenue Code of 1986, referred to in subsec. (c)(1)(B), is codified as 26 U.S.C. § 403(b).

Section 408(a) or 408(b) of the Internal Revenue Code of 1986, referred to in subsec. (c)(1)(D), is codified as 26 U.S.C. § 408(a) or 408(b).

Editor's Notes

Section 3703 of D.C. Law 14-190 provided: “This subtitle subtitle A of title XXXVII, §§ 3701 to 3705 of D.C. Law 14-190 is adopted in good faith to comply with the requirements of the Economic Growth and Tax Relief Reconciliation Act of 2001, approved June 7, 2001 (115 Stat. 38; scattered sections of Title 26 of the U.S. Code) (‘EGTRRA’) and shall be construed in accordance with EGTRRA and guidance issued thereunder.”

Section 3704 of D.C. Law 14-190 provided: “This subtitle subtitle A of title XXXVII, §§ 3701 to 3705 of D.C. Law 14-190 shall apply as of January 1, 2002.”