OHIO PUBLIC EMPLOYEES RETIREMENT SYSTEM 277 East Town Street, Columbus, Ohio PERS (7377)

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1 OHIO PUBLIC EMPLOYEES RETIREMENT SYSTEM 277 East Town Street, Columbus, Ohio PERS (7377) MEMORANDUM DATE: June 9, 2006 TO: FROM: OPERS Retirement Board Members Julie E. Becker, General Counsel Ellen Leach, Associate Counsel Lauren Gresh, Associate Counsel RE: IV. Action Items: B. Rules: Rule , Interim benefit payment Rule , Benefits payable to a re-employed retirant Rule , Selection of payment plan spousal consent Rule , Beneficiary s percentage under plan C Rule , Beneficiary and payment plan changes after retirement Rule , Cost of living adjustment Rule , Designation of beneficiaries under plan F Rule , Calculation of amount due retirant with multiple beneficiaries under plan F Rule , Priority of multiple court orders under plan F Rule , Beneficiary and payment plan changes after retirement Rule , Designation of beneficiaries under plan F Rule , Calculation of amount due retirant with multiple beneficiaries under plan F Rule , Priority of multiple court orders under plan F Rule , Cost of living adjustment Amendment Two to the Combined Plan Amendment Two to the Member-Directed Plan Action requested: moved, seconded, to do all of the following: (1) Approve for submission to the Joint Committee on Agency Rule Review (JCARR) and the Legislative Service Commission (LSC), Rules , , , , , , and , as set forth in this memorandum; (2) Authorize the Interim Executive Director to execute Amendment Two to the plan document for the Combined Plan, as set forth in this memorandum; and 1

2 (3) Authorize the Interim Executive Director to execute Amendment Two to the plan document for the Member-Directed Plan, as set forth in this memorandum. I. Background The portions of Substitute House Bill 98 of the 125 th General Assembly that impact OPERS are effective on October 27, The bill establishes a new plan of payment for retirement allowances that will enable members to select up to four surviving beneficiaries. As such, OPERS must draft several new administrative rules and make corresponding amendments to existing rules to implement the legislation. HB 98 has two major components: (1) cost of living adjustments will be proportionately allocated between members and Alternate Payees under Division of Property Orders; and (2) members may be ordered to select Plan F and designate a former spouse as beneficiary of a joint and survivor annuity. Since HB 98 impacts all three retirement plans, we must also make conforming amendments to the plan documents for the Combined and Member-Directed Plans. In addition to HB 98, the plan document amendments include provision to conform the Combined and Member-Directed Plans to Amended House Bill 10 of the 126 th General Assembly, which took effect on June 5, II. (A) (B) (C) Summary of rule amendments and new rules Rule , Interim benefit payment Technical changes only Rule , Benefits payable to a re-employed retirant Technical changes only Rule , Selection of payment plan spousal consent Spousal consent to a plan of payment is required: any time the member selects a plan of payment other than Plan A, or when the member is ordered to designate the former spouse under Plan F and also designates the current spouse. A member who voluntarily selects Plan F or designates more beneficiaries than just the current and former spouses may do so only pursuant to spousal consent. (D) Rule , Beneficiary s percentage under plan C Technical changes only (E) Rule , Beneficiary and payment plan changes after retirement Federal tax law regarding required minimum distribution limits a member s ability to change retirement plans and beneficiaries after the benefit has commenced. Upon marriage, a member under Plan F may designate the new spouse so long as a former spouse s payment is not impacted. A member may not change from 2

3 a joint and survivor annuity with one beneficiary (Plans A, C, D) to a joint and survivor annuity with multiple beneficiaries (Plan F). The amendment to paragraph (A) of this rule also clarifies that a retroactive popup to Plan B upon the death of a beneficiary will only be effective the month following receipt of the beneficiary s death certificate. (F) Rule , Cost of living adjustment (Traditional Pension Plan) The division of the COLA under the Traditional Pension Plan shall occur on every retiree s account that is currently subject to a Division of Property Order with the next COLA payment anniversary date that occurs after October 27, 2006, and each anniversary date thereafter. Division of Property Orders approved in the future will share in each COLA granted while the order is in effect. (G) Rule , Designation of beneficiaries under plan F Designated percentages under Plan F must be whole percentages. (H) Rule , Calculation of amount due retirant with multiple beneficiaries under plan F Amounts due but unpaid to a deceased retirant shall be shared proportionately among the designated beneficiaries under Plan F under the Traditional Pension Plan. (I) Rule , Priority of multiple court orders under plan F Court orders shall receive priority based on the order they are received. (J) Rule , Beneficiary and payment plan changes after retirement Renumbered rule , amended to make beneficiary and plan of payment changes under Plan F consistent with the Combined and Member-Directed Plans. (K) Rule , Designation of beneficiaries under plan F Designated percentages under Plan F under the Combined and Member- Directed Plans must be whole percentages. (L) Rule , Calculation of amount due retirant with multiple beneficiaries under plan F Amounts due but unpaid to a deceased retirant shall be shared proportionately among the designated beneficiaries under Plan F under the Combined and Member-Directed Plans. (M) Rule , Priority of multiple court orders under plan F Court orders shall receive priority based on the order they are received under the Combined and Member-Directed Plans. (N) Rule , Cost of living adjustment (Combined Plan) 3

4 The division of the COLA under the Combined Plan shall occur on every retiree s account currently subject to a Division of Property Order at the next COLA payment anniversary date that occurs after October 27, 2006, and each anniversary date thereafter. Division of Property Orders approved in the future will share in each COLA granted while the order is in effect. III. (A) Summary of conforming amendments to the Member-Directed and Combined Plan Documents Amendment Two to the Combined Plan Document 9.02(a) A participant in the Combined Plan has many distribution options regarding the Defined Contribution portion of the Combined Plan upon retirement. If the participant is subject to an order requiring him or her to select Plan F and designate a former spouse as beneficiary, the participant must annuitize the Defined Contribution portion of the account and select the appropriate plan of payment and must select Plan F and designate their former spouse as beneficiary for the Defined Benefit portion of the account as well. See ORC as amended by HB (b) Conforming amendment, parallel to ORC (B)(1)(b) as amended by HB (d) Conforming amendment, parallel to ORC (D)(1) as amended by HB (e) Conforming amendment, parallel to ORC (D)(2) as amended by HB (f) Conforming amendment, parallel to ORC (E) as amended by HB (d) Conforming amendment, parallel to ORC (B) as amended by HB (e) Conforming amendment, parallel to ORC (B)(1) and (B)(3)(e) as amended by HB (f) Conforming amendment, parallel to ORC (D)(1) as amended by HB (g) Conforming amendment, parallel to ORC (D)(2) as amended by HB 98 4

5 9.03(h) Conforming amendment, parallel to ORC (E) as amended by HB 98 (B) Amendment Two to the Member-Directed Plan Document 9.02(a) A participant in the Member-Directed Plan has many distribution options regarding the member s individual account in the Plan upon retirement. If the participant is subject to an order requiring him or her to select Plan F and designate a former spouse as beneficiary, the participant must annuitize the individual account and select the appropriate plan of payment. See ORC as amended by HB (b) Conforming amendment, parallel to ORC (B)(1)(b) as amended by HB (d) Conforming amendment, parallel to ORC (D)(1) as amended by HB (e) Conforming amendment, parallel to ORC (D)(2) as amended by HB (f) Conforming amendment, parallel to ORC (E) as amended by HB 98 5

6 Interim benefit payment (A) For purposes of this rule and rules and of the Administrative Code: (1) Finalized retirement benefit means: (a) (b) (c) (d) (e) Any monthly benefit amount paid to a benefit recipient pursuant to section , , , , , , , or of the Revised Code, and calculated after the receipt of the final report of retirement contributions upon which the member appears and purchase of any service credit for which the member was eligible; Any monthly additional annuity benefit paid to a member or contributor pursuant to section of the Revised Code and rule of the Administrative Code, and calculated after the receipt of any eligible rollover distributions as allowed pursuant to rule of the Administrative Code; Any monthly benefit amount paid to a beneficiary pursuant to section of the Revised Code, and calculated after the receipt of the final report of retirement contributions upon which the member appears and purchase of any service credit for which the member was eligible; Any monthly benefit amount paid pursuant to section 9.03 of the combined plan document calculated after the receipt of the final report of retirement contributions upon which the member appears and purchase of any service credit for which the member was eligible; Any monthly annuity paid pursuant to section 9.02 of the combined or member-directed plan documents after the receipt of the final report of retirement contributions upon which the member appears. (2) Interim benefit payment means: (a) (b) Any monthly benefit amount paid to a benefit recipient pursuant to section , , , , , , , or of the Revised Code and prior to the payment of a finalized retirement benefit as defined in this rule; Any monthly additional annuity amount paid to a member or contributor pursuant to section of the Revised Code, and rule of the Administrative Code, and prior to the receipt of any eligible rollover distribution as allowed pursuant to rule of the Administrative Code; 6

7 (c) (d) (e) Any monthly benefit amount paid to a beneficiary pursuant to section of the Revised Code and prior to the payment of a finalized retirement benefit as defined in this rule; Any monthly benefit amount paid pursuant to section 9.03 of the combined plan document prior to the payment of a finalized retirement benefit; Any monthly annuity paid pursuant to section 9.02 of the combined or member-directed plan documents prior to the payment of a finalized retirement benefit. (3) Beneficiary means a person qualified to receive a monthly benefit pursuant to section of the Revised Code after the death of a member or disability recipient. (4) Partial lump sum option payment means the lump sum payment described in division (A)(2) of section , division (B)(3)(4) of section of the Revised Code, or section 9.03(e)(3) of the combined plan document. In the case of a monthly annuity paid pursuant to section 9.02 of the combined or memberdirected plan document, partial lump sum option payment means the lump sum payment a member may elect for the member s monthly annuity plan of payment. (5) Initial benefit payment means the first benefit warrant, check, or payment to the a member or beneficiary. In the case that more than one initial payment is disbursed from one or more of the retirement plans defined in rule of the Administrative Code, the first payment issued by the retirement system shall constitute the initial benefit payment for purposes of determining whether a benefit recipient is eligible to withdraw an application. (B) (C) (D) Interim benefit payments may be paid to expedite the payment of a benefit recipient or a beneficiary s initial benefit payment in accordance with this rule. A beneficiary applying for a benefit under division (A)(2) of section of the Revised Code, or a member or contributor applying for a monthly benefit under section , , , , , , or of the Revised Code or section, sections 9.02 or 9.03 of the combined plan document, or section 9.02 of the member-directed plan document, that includes a partial lump sum option payment, shall receive the partial lump sum option payment no sooner earlier than thirty days after issuance of the initial benefit payment. A member or contributor of the public employees retirement system is eligible to may receive an interim benefit payment if either of the following is fully satisfied: (1) (a) The member is eligible for retirement pursuant to section , , , , , or of the Revised Code or 7

8 section 9.03 Article IX of the combined or member-directed plan document at the time the retirement application is filed; (b) (c) (d) The member, no later than thirty days prior to the effective retirement benefit date has filed all applications, forms and documents necessary to process the member s retirement benefit at least thirty days prior to the effective retirement benefit date; The member s employer has certified the last day for which the member will receive earnable salary; The member or contributor who makes payment for an additional annuity, pursuant to section of the Revised Code, has at least one hundred dollars in an additional annuity account. (2) (a) The member or contributor is eligible for disability benefits pursuant to section , , , or of the Revised Code; (b) (c) The public employees retirement board has approved such member s the application for disability benefits by the member or contributor; and The In the case of a member, the member s employer has certified the last day for which the member will receive earnable salary. (E) A beneficiary is eligible to may receive an interim benefit payment if all of the following are satisfied: (1) The beneficiary is eligible for a benefit pursuant to section of the Revised Code at the time the application is filed; (2) The beneficiary has filed all applications, forms and documents necessary to process the benefit; (3) The member s employer has certified the last day for which the member received earnable salary. (F) (1) An For benefits payable under the traditional pension plan and section 9.03 of the combined plan document, an interim benefit payment shall be calculated using the earnable salary and service credit available in the member s account of a member or contributor at the time of the calculation and, if the member or contributor makes payment for an additional annuity pursuant to section of the Revised Code, using the additional annuity account available in the member s account at the time of the calculation. For a monthly annuity payment option under section 9.02 of the combined or member-directed plan document, an 8

9 interim benefit payment shall be calculated using the portion of the member s individual defined contribution account specified by the member on the member s retirement application. (2) (a) The retirement system shall revise the monthly benefit to which the member or beneficiary is entitled following the receipt of the final report of retirement contributions upon which the member appears and the earliest of the following: (i) (ii) (iii) The member s or the beneficiary s purchase of any service credit for which the member is eligible, or refusal to purchase such credit, by the member or beneficiary; One hundred eighty days after the member s effective retirement benefit date or one hundred and eighty days after the beneficiary s effective benefit date; The receipt of any eligible rollover distribution. (b) (i) If the finalized retirement benefit is greater than the interim benefit payment, the retirement system shall increase the current benefit and issue a retroactive payment for the difference between the prior interim benefit payment and the finalized retirement benefit. (ii) If the finalized retirement benefit is less than the interim benefit payment, the retirement system shall decrease the current benefit. The benefit recipient or the beneficiary shall repay to the retirement system the amount of the overpayment of benefits. If the benefit recipient or the beneficiary fails to repay such amount, the retirement system shall withhold the amount from any benefit due the benefit recipient or the beneficiary. (G) A member or a beneficiary may withdraw their application for benefits prior to receipt of the initial benefit payment by providing the retirement system with a written request to withdraw the application over the member s or beneficiary s signature of the member or beneficiary. (H) (1) A beneficiary applying for a benefit under division (A)(2) of section of the Revised Code, or a member or contributor applying for a monthly benefit under section , , , , , , or of the Revised Code or, section 9.02 or 9.03 of the combined plan document, or section 9.02 of the member-directed plan document that does not include a partial lump sum option payment may elect to receive a partial lump sum option payment, or the member or contributor may change their plan of payment, at any time prior to issuance of the finalized retirement benefit payment. 9

10 (2) A beneficiary applying for a benefit under division (A)(2) of section of the Revised Code, or a member or contributor applying for a monthly benefit under section , , , ,145.34, , or of the Revised Code or, section 9.02 or 9.03 of the combined plan document, or section 9.02 of the member-directed plan document, that includes a partial lump sum option payment may change their partial lump sum option payment amount, or the member or contributor may change their plan of payment, at any time prior to issuance of the partial lump sum option payment or transfer of the partial lump sum option payment by the retirement system to their financial institution. (3) A member or contributor is ineligible to name a different beneficiary under a plan of payment selected by the member or contributor unless the member or contributor reselects or elects a different plan of payment under this rule. The spouse of a member or contributor who reselects or elects a different plan of payment shall consent on a form provided by the retirement system to the new plan of payment selected by the retirant. Promulgated Under: Statutory Authority: , Rule Amplifies: , , , , , , , , , , , , Rule Review Date: 9/29/10; 9/29/05. Replaces: Parts of and Effective Date History: 1/1/06; 12/24/04; 2/16/04; 1/1/04 (Emer.); 6/20/03; 1/1/03; 5/29/95; 10/31/94; 3/30/92. 10

11 Benefits payable to a re-employed retirant (A) (1) Benefits payable to a PERS or other system retirant pursuant to section of the Revised Code shall be effective as provided in that section the first of the month following the later of: (a) (b) (c) Termination of public employment; Eligibility by attaining the required minimum age or passage of the minimum benefit period; or At a later date specified by the retirant. (2) Benefits payable to the beneficiary of a PERS or other system retirant shall be effective the first of the month following the retirant s date of death. (B) (C) (D) A PERS or other system retirant may withdraw an application for benefits in the same method as described in rule of the Administrative Code. Unless voided by an event as described in division (G) of section of the Revised Code, the designation of a beneficiary by a PERS or other system retirant shall apply for all re-employment periods except for a period for which a benefit has already been paid or for which a retirant is accruing a supplemental benefit. If a retirant makes an application for a benefit pursuant to division (B)(2) of section of the Revised Code, the retirant shall select a plan of payment as described in divisions division (B)(1), and (B)(2)(3)(a) to (B)(2)(3)(c), and (B)(3)(e) of section of the Revised Code, and designate a beneficiary. Promulgated Under: Statutory Authority: Rule Amplifies: , , Rule Review Date: 9/29/10; 9/29/05. Replaces: Effective Date History: 6/20/03; 1/1/03; 4/5/01; 8/1/92. 11

12 Selection of payment plan spousal consent (A) For effective benefit dates, or applications for benefits received, on or after September 16, 1998, a A contributor who is married at the time of retirement under section , , , , , , , or of the Revised Code, is married section 9.02 or 9.03 of the combined plan document, or section 9.02 of the member-directed plan document shall receive a retirement benefit under payment plan A unless one of the following apply: (A)(1) The spouse consents on a form provided by the public employees retirement system that the spouse is aware that the contributor has selected a payment plan other than plan A or plan A and a partial lump sum option payment under division (B)(3) of section of the Revised Code as defined in rule of the Administrative Code, or a payment plan other than plan A; or (B)(2) The public employees retirement board waives the requirement of a spousal consent in accordance with rule or rule of the Administrative Code. (3) The contributor is required to elect a plan of payment and designate a former spouse as beneficiary pursuant to a court order issued under section or of the Revised Code or the laws of another state regarding the division of marital property and the contributor also designates the contributor s current spouse as a beneficiary under that plan. (B) This paragraph applies to a contributor who elects a plan of payment under which a portion of the contributor s benefit continues, after the death of the contributor, to two, three, or four surviving beneficiaries. A contributor s current spouse must also consent to the election of a plan of payment described in this paragraph if either of the following applies: (1) The contributor is not subject to a court order issued under section or of the Revised Code or the laws of another state regarding the division of marital property that requires the contributor to elect the plan of payment described in this paragraph; (2) The contributor is ordered to designate a former spouse as beneficiary of a specified portion of the benefit under section or of the Revised Code or the laws of another state regarding the division of marital property, but also designates a beneficiary or beneficiaries other than the contributor s current spouse and former spouse under that plan of payment. Promulgated Under: Statutory Authority: ,

13 Rule Amplifies: , , , , , , Rule Review Date: 9/29/11; 9/29/06. Replaces: Part of Effective Date History: 2/16/04; 1/1/04 (Emer.); 1/1/03; 11/2/00; 9/27/98; 2/1/93; 8/6/90. 13

14 Beneficiary s percentage under plan C The portion of a member s benefit retirement allowance that continues after the member s death to the a member s sole surviving beneficiary pursuant to the plan of payment described in division (B)(2)(3)(b) of section of the Revised Code or section 9.03(e)(2)(ii) of the combined plan document shall meet or exceed the greater of the following: (A) (B) Ten percent of the member s monthly benefit retirement allowance; A percentage that causes the survivor s beneficiary s monthly benefit to be at least one hundred dollars. Promulgated Under: Statutory Authority: , Rule Amplifies: , , , , , , Rule Review Date: 9/29/11; 9/29/06. Effective Date History: 7/01/04. 14

15 Beneficiary and payment plan changes after retirement (A) (B) As used in this rule, and in section of the Revised Code, sections 9.02(d) and 9.03(f) of the combined plan document, and section 9.02(d) of the member-directed plan document, notice of the death means the date on which the public employees retirement system receives the death certificate of the spouse or beneficiary. Section of the Revised Code as effective July 24, 1990 renames the plans of payment available under sections , , and of the Revised Code. For purposes of Chapter 145. of the Revised Code and PERS rules such payment plans shall be treated the same as follows: (1) A straight or single life annuity payment plan and plan B. (2) An option 1 payment plan and plan D. (3) An option 2 payment plan and plan A when the retirant s spouse is the retirant s beneficiary and the amount payable after the retirant s death is fifty per cent. (4) An option 2 payment plan and plan C when the beneficiary is someone other than the retirant s spouse or the amount payable to a beneficiary after the retirant s death is other than fifty per cent. (5) An option 3 payment plan and plan E. (B)(C) A designation of beneficiary may be changed after retirement when the retirant is receiving benefits under: (1) A payment plan B. (2) A payment plan E, but the payment plan cannot be changed. (C)(D) When a retirant is receiving benefits under plan A, C, or D, the plan shall be changed to plan B and a new beneficiary may be designated: (1) Effective on the later of September 1, 1976 or the The first day of the month following notice of the death of the spouse or other individual designated as beneficiary under the plan. (2) Effective on the later of November 1, 1978 or the first day of the month following the death of the beneficiary, other than a spouse, designated under the plan. (3) On the first day of the month after receipt of the election of the retirant to revert to plan B following divorce, annulment or dissolution of marriage with a spouse designated as beneficiary under the plan, except that no benefit shall be increased without the written consent of the former spouse who was the designated 15

16 beneficiary or an order from the court with jurisdiction over the termination of the marriage. (D)(E) (1) The right to have plan A, C, or D recomputed as plan B upon notice of the death of the beneficiary, or upon divorce, annulment or dissolution of marriage with a spouse who was designated as beneficiary, applies to all retirants who are receiving benefits under plan A, C, or D regardless of the original effective date of benefits. (2) A retirant who elected to receive a partial lump sum option payment under division (B)(3)(4) of section of the Revised Code shall have the partial lump sum option payment accounted for upon the recomputation of the retirant s benefit under plan B. (E)(F) Upon the marriage or remarriage of a retirant receiving benefits under plan F, the retirant may designate the new spouse as a beneficiary under plan F only if the retirant does not already have four beneficiaries designated under that plan at the time the retirant applies to add the new spouse. (G) The death of any designated beneficiary under plan F shall not change the plan of payment. The plan F benefit shall continue to the remaining designated beneficiaries in their same percentages and the deceased beneficiary s portion shall revert to the retirant for the remainder of his or her lifetime. A retirant may not cancel the plan of payment and return to a single lifetime benefit equivalent until notice of the death of all designated beneficiaries under that plan. (E)(H) (1) A retirant who is receiving benefits under plan B may, upon the retirant s later marriage or remarriage, elect to have the retirant s benefit recomputed as plan A, C or D under and designate only the new spouse as beneficiary, as provided in division (E) of section of the Revised Code designating the current spouse, sections 9.02(f) and 9.03(h) of the combined plan document, and section 9.02(f) of the member-directed plan document. The effective date shall be the date of receipt by the board of the election and the actuarial factors shall be based on the actuarial ages of the retirant and beneficiary at the time the benefit is recomputed. (2) A retirant who elected to receive a partial lump sum option payment under division (B)(3)(4) of section of the Revised Code shall have the partial lump sum option payment accounted for upon recomputation of the retirant s benefit under plan A, C, or D. (F)(I) A retirant who elected to receive a partial lump sum option payment, as defined in rule of the Administrative Code, shall have the partial lump sum option payment accounted for upon the recomputation of the retirant s benefit. 16

17 (J) Any request for a change of plan of payment or of beneficiary, as authorized in divisions (D) and (E) of of the Revised Code and this rule, shall be made on a form approved by the public employees retirement board. Promulgated Under: Statutory Authority: Rule Amplifies: , , , , Rule Review Date: 9/29/11; 9/29/06. Replaces: Effective Date History: 8/11/05; 6/6/05 (Emer.); 2/16/04; 1/1/04 (Emer.); 1/1/03; 9/27/98; 8/6/90; 10/30/78; 8/20/76. 17

18 Cost of living adjustment (A) (B) As used in this rule, alternate payee has the same meaning as in section of the Revised Code. A benefit recipient who has received an allowance for at least twelve months shall have such allowance increased pursuant to section of the Revised Code and as provided in this rule on the annual anniversary of the recipient s effective benefit date. (B)(C) A new benefit base upon which a cost of living adjustment shall be calculated shall be established when: (1) A post retirement increase is granted, other than either a cost of living adjustment or a payment representing reimbursement of premium for medicare part B. (2) A retirant receiving under plan A or C dies and the surviving beneficiary begins receiving a portion of the amount previously paid to the retirant. (3) A survivor benefit is adjusted as the result of adding or removing survivor dependents. (4) A retirant receiving under plan A, C, or D reverts to plan B as a result of the death of the beneficiary spouse, or divorce or dissolution of marriage as authorized in section of the Revised Code and rule of the Administrative Code. (5) A retirant receiving under plan F reverts to plan B as a result of the removal of all beneficiaries as authorized in section of the Revised Code and rule of the Administrative Code. (6) The benefit established at retirement is recalculated for any reason except for either a cost of living adjustment or reimbursement of premium for medicare part B. (6)(7) A part of a benefit is waived then the base shall be the portion being paid. If a waiver is withdrawn, the full base shall be re-established. (D) For allowances that became payable before October 27, 2006, the apportionment of a cost of living adjustment between a benefit recipient and an alternate payee pursuant to division (B) of section of the Revised Code shall begin with the next cost of living adjustment granted on or after October 27, 2006, and shall continue while the order is in effect. Promulgated Under:

19 Statutory Authority: Rule Amplifies: Rule Review Date: 9/29/11; 9/29/06. Replaces: Effective Date History: 1/1/03; 3/22/02; 10/7/01; 1/31/98; 8/6/90; 10/11/88; 8/20/76. 19

20 Designation of beneficiaries under plan F The portion of the lesser amount continuing after death to two, three, or four surviving beneficiaries designated at the time of a member s retirement shall be allocated among the beneficiaries in whole percentages only. Promulgated Under: Statutory Authority: Rule Amplifies: Rule Review Date: 9/29/11. Replaces: None Effective Date History: None. 20

21 Calculation of amount due retirant with multiple beneficiaries under plan F (A) (B) This rule applies to a contributor who elects a plan of payment under which a portion of the contributor s benefit continues, after the death of the contributor, to two, three, or four surviving beneficiaries. Amounts due to a retirant and unpaid to the retirant at death, shall be paid to the surviving designated beneficiaries as provided in division (D) of section of the Revised Code and paragraph (B) of this rule. The amount payable to each surviving designated beneficiary described in paragraph (A) of this rule shall be determined by multiplying the amount due the retirant by a fraction whose numerator is the gross monthly amount the beneficiary will be paid and whose denominator is the total gross monthly amount all beneficiaries will be paid. Promulgated Under: Statutory Authority: Rule Amplifies: (D), Rule Review Date: 9/29/11. Replaces: None. Effective Date History: None. 21

22 Priority of multiple court orders under plan F If, at the time of retirement, a member is subject to more than one court order issued under section or of the Revised Code, or the laws of another state regarding the division of marital property, the public employees retirement system shall establish the priority in which the court orders will be administered by the retirement system. Priority shall be established by the earliest date on which the orders were received by the retirement system. Promulgated Under: Statutory Authority: Rule Amplifies: Rule Review Date: 9/29/11. Replaces: None. Effective Date History: None. 22

23 Beneficiary and payment plan changes after retirement (A) (B) (C) This rule amplifies section 9.03(e) of the combined plan document and, in the case of a monthly annuity payment option only, sections 9.02 of the combined and memberdirected plan documents. Beneficiary and plan of payment changes for a retirement allowance under section 9.03(e) of the combined plan document or for a monthly annuity under section 9.02 of the combined plan document shall be made in accordance with rules , , and of the Administrative Code. Beneficiary and plan of payment changes for a monthly annuity under section 9.02 of the member-directed plan document shall be made in accordance with rules and of the Administrative Code. Promulgated Under: Statutory Authority: Rule Amplifies: Rule Review Date: Replaces: None. Effective Date History: 23

24 Designation of beneficiaries under plan F (A) (B) This rule amplifies section 9.03(e) of the combined plan document and, in the case of a monthly annuity payment option only, sections 9.02 of the combined and memberdirected plan documents. Designation of beneficiaries pursuant to a plan of payment under which a portion of the benefit continues, after the death of the retirant, to two, three, or four surviving beneficiaries shall be made in accordance with rule of the Administrative Code. Promulgated Under: Statutory Authority: Rule Amplifies: Rule Review Date: 9/29/09 Replaces: None. Effective Date History: 24

25 Calculation of amount due retirant with multiple beneficiaries under plan F (A) (B) This rule amplifies section 9.03(e) of the combined plan document and, in the case of a monthly annuity payment option only, sections 9.02 of the combined and memberdirected plan documents. Calculation of the amount due to a retirant receiving a benefit pursuant to a plan of payment under which a portion of the benefit continues, after the death of the retirant, to two, three, or four surviving beneficiaries shall be calculated in accordance with rule of the Administrative Code. Promulgated Under: Statutory Authority: Rule Amplifies: Rule Review Date: 9/29/09 Replaces: None. Effective Date History: 25

26 Priority of multiple court orders under plan F (A) This rule amplifies section 9.03(e) of the combined plan document and, in the case of a monthly annuity payment option only, sections 9.02 of the combined and memberdirected plan documents. (B) The priority of multiple court orders shall be established in accordance with rule of the Administrative Code. Promulgated Under: Statutory Authority: Rule Amplifies: Rule Review Date: 9/29/09 Replaces: None. Effective Date History: 26

27 Cost of living adjustment (A) (B) As used in this rule, alternate payee has the same meaning as in section of the Revised Code. A benefit recipient who has received an allowance under section 9.03 of the combined plan document for at least twelve months shall have such allowance increased pursuant to section of the Revised Code and as provided in this rule on the annual anniversary of the recipient s effective benefit date. (B)(C) A new benefit base upon which a cost of living adjustment shall be calculated shall be established when: (1) A post retirement increase is granted, other than either a cost of living adjustment or a payment representing reimbursement of premium for medicare part B. (2) A retirant receiving under plan A or C dies and the surviving beneficiary begins receiving a portion of the amount previously paid to the retirant. (3) A retirant receiving under plan A, C, or D reverts to plan B as a result of the death of the beneficiary spouse, or divorce or dissolution of marriage as authorized in section 9.03 of the combined plan document and rule of the Administrative Code. (4) A retirant receiving under plan F reverts to plan B as a result of the removal of all beneficiaries as authorized in section 9.03 of the combined plan document and rule of the Administrative Code. (5) The benefit established at retirement is recalculated for any reason except for either a cost of living adjustment or reimbursement of premium for medicare part B. (5)(6) A part of a benefit is waived then the base shall be the portion being paid. If a waiver is withdrawn, the full base shall be re-established. (D) For allowances that became payable before October 27, 2006, the apportionment of a cost of living adjustment between a benefit recipient and an alternate payee pursuant to section 9.03(d) of the combined plan document shall begin with the next cost of living adjustment granted on or after October 27, 2006, and shall continue while the order is in effect. Promulgated Under: Statutory Authority: Rule Amplifies: , , Rule Review Date: 9/29/09; 9/29/04. Effective Date History: 1/1/03. 27

28 Amendment Two to the Public Employees Retirement System of Ohio Combined Defined Benefit/Defined Contribution Plan WHEREAS, the Public Employees Retirement System of Ohio Combined Defined Benefit/Defined Contribution Plan ( Plan ) was originally effective January 1, 2003; WHEREAS, the Public Employees Retirement Board, as Trustees of the Plan ( Trustees ), reserved the right to amend the Plan pursuant to Article XXV of the Plan; and WHEREAS, the Trustees now desire to amend the Plan due to the provisions of Substitute House Bill 98 of the 125 th General Assembly and Amended House Bill 10 of the 126 th General Assembly; NOW, THEREFORE, the Plan is hereby amended as follows, effective October 27, 2006: 1. Section 9.02(a) of the Plan, describing Payment Options for Accounts under Section 9.01(a), is hereby amended to be and read as follows: (a) Subject to Article XIV and section of the Ohio Revised Code, a Participant may select from payment options in the form of a partial lump sum, subject to any rules adopted by the Board; monthly annuity payments (with joint and survivor options); periodic payments over a period certain; periodic payments of a specific monthly amount; payments with a deferred start date; or a combination of these options. An unmarried Participant who fails to select a payment option under this Section shall be paid in accordance with Section Unless the Participant is eligible to or required to elect another payment option as described in this Section, a married Participant shall receive a monthly joint and survivor annuity, which shall consist of the actuarial equivalent of the Participant's single life annuity based on the Participant's Accounts in a lesser amount payable for life and one-half of such allowance continuing after death to the Participant's spouse for the life of the spouse. The effective date of a payment option provided under this Section shall be the later of (1) a date determined by the Participant or (2) the attainment of minimum age and service credit eligibility under Section Section 9.02(b) of the Plan, describing Payment Options for Accounts under Section 9.01(a), is hereby amended to be and read as follows: (b) A married Participant may elect to receive the Participant's Accounts under a payment option other than a monthly joint and survivor annuity if either of the following is the case: the Participant's spouse consents in writing to the Participant's election of a payment option other than a monthly joint and survivor annuity or the Board waives the requirement that the spouse consent; or a plan of payment providing for payment in a specified portion of a monthly annuity continuing after the Participant s death to a former spouse is required by a court order issued under section or of the Ohio Revised Code or the laws of another state regarding division of marital property prior to the Effective Date of the Participant s Retirement. 28

29 If a Participant is required to select a monthly annuity plan of payment providing for payment in a specified portion to a former spouse and the Board has received a copy of the order described in this Section, the Board shall accept the Participant s election of a plan of payment under this Section only if the Participant complies with both of the following: the Participant elects a monthly annuity plan of payment that is in accordance with the order described in this Section; and, if the Participant is married, the Participant elects a monthly annuity plan of payment and designates the Participant s current spouse as a Beneficiary under that plan of payment unless that spouse consents in writing to not being designated a Beneficiary under any plan of payment, or the Board waives the requirement that the current spouse consent. An application for a benefit under this Section shall include an explanation of all of the following: (1) That, if the Participant is married, unless the spouse consents to another payment option or there is a court order dividing marital property issued under section or of the Ohio Revised Code or the laws of another state regarding the division of marital property that provides for payment in a specified amount, the Participant's benefit under this Section will be paid as a monthly joint and survivor annuity, which consists of the actuarial equivalent of the Participant's single-life annuity based on the Participant's Accounts in a lesser amount payable for life and one-half of the benefit continuing after death to the surviving spouse for the life of the spouse; (2) A description of the alternative payment options available with the consent of the spouse; (3) That the spouse may consent to another payment option and the procedure for giving consent; (4) That consent is irrevocable once notice of consent is filed with the Board. Consent shall be valid only if it is signed, in writing, and witnessed by a notary public. The Board may waive the requirement of consent if the spouse is incapacitated or cannot be located or for any other reason specified by the Board. Consent or waiver is effective only with regard to the spouse who is the subject of the consent or waiver. 3. Section 9.02(d) of the Plan, describing Payment Options for Accounts under Section 9.01(a), is hereby amended to be and read as follows: (d) The death of a spouse or any designated Beneficiary following commencement of benefits under this Section shall cancel any the portion of the monthly annuity plan of payment option to provide providing continuing lifetime benefits to the deceased spouse or deceased designated Beneficiary and return the. The retired Participant to shall receive the actuarial equivalent of the retired Participant's single life annuity equivalent, as determined by the Board, to based on the number of remaining Beneficiaries, with no change in the amount payable to any remaining Beneficiary. The change shall be effective the month following receipt by the Board of notice of the date of death. 29

30 4. Section 9.02(e) of the Plan, describing Payment Options for Accounts under Section 9.01(a), is hereby amended to be and read as follows: (e) On divorce, annulment, or marriage dissolution, a retired Participant receiving benefits under this Section under a monthly annuity plan of payment option that provides for continuation of all or part of the benefits after death for the lifetime of the retired Participant's surviving spouse may, with the written consent of the spouse or pursuant to an order of the court with jurisdiction over the termination of the marriage, elect to cancel the portion of the monthly annuity plan and of payment providing continuing lifetime benefits to that spouse. The retired Participant shall receive the actuarial equivalent of the retired Participant's single life annuity equivalent, as determined by the Board, based on the number of remaining Beneficiaries, with no change in amount payable to any remaining Beneficiary. The election shall be made on an Applicable Form and shall be effective the month following its receipt by the Board. 5. Section 9.02(f) of the Plan, describing Payment Options for Accounts under Section 9.01(a), is hereby amended to be and read as follows: (f) Following a marriage or remarriage, a both of the following apply: (1) A retired Participant who is receiving benefits in the form of a monthly single life annuity may elect a new monthly annuity plan of payment option under this Section based on the actuarial equivalent of the retired Participant's single life annuity, as determined by the Board. (2) A retired Participant who is receiving a benefit under a monthly annuity plan of payment providing for payment to a former spouse pursuant to a court order described in Section 9.02(b) may elect a new plan of payment providing for payment to a former spouse based on the actuarial equivalent of the retired Participant s single life annuity, as determined by the Board, if the new plan of payment elected does not reduce the payment to the former spouse. If the marriage or remarriage occurs on or after June 6, 2005, the election must be made not later than one year after the date of the marriage or remarriage. The new plan of payment option shall be become effective the first day of the month following on the date of receipt by the Board of an Applicable Form, but any change in the amount of the benefit shall commence on the first day of the month following the effective date of the plan of payment. 6. Section 9.03(d) of the Plan, describing Payment of Retirement Allowance, is hereby amended to be and read as follows: (d) (1) The Administrator shall annually increase each allowance payable under this Section by three (3) per cent, subject to Article IV. The first increase is payable upon a Participant receiving a Retirement Allowance for twelve 30

31 (12) months. The increased amount is payable for the ensuing twelvemonth period or until the next increase is granted under this Section, whichever is later. In the case of an allowance being paid to a Beneficiary under one of the options specified in this Section, subsequent increases shall be determined from the date of the first increase paid to the former Member. The date of the first increase under this Section becomes the anniversary date for any future increases. The Retirement Allowance used in the first calculation of an increase shall remain as the base for all future increases, unless a new base is established. (2) If payment of a portion of an allowance is made to an alternate payee under section of the Ohio Revised Code, increases under this Section granted while the order is in effect shall be apportioned between the alternate payee and the Participant in the same proportion that the amount being paid to the alternate payee bears to the amount paid to the Participant. If payment of a portion of an allowance is made to one or more Beneficiaries under plan F as described in this Section, each increase under this Section granted while the plan of payment is in effect shall be divided among the designated Beneficiaries in accordance with the portion each Beneficiary has been allocated. 7. Section 9.03(e) of the Plan, describing Payment of Retirement Allowance, is hereby amended to be and read as follows: (e) A Participant who is eligible for a Retirement Allowance under this Section shall elect a plan of payment on a form provided by the Board. A plan of payment elected under this Section shall be effective only if approved by the System, which shall approve it only if it is certified by an Actuary engaged by the Board to be the actuarial equivalent of the Retirement Allowance calculated under this Section: (1) Unless the Participant is eligible to elect another plan of payment Except as provided in this Section, a Participant who retires under this Section shall receive a Retirement Allowance under "plan A," which shall consist of the actuarial equivalent of the Participant's Retirement Allowance determined under this Section in a lesser amount payable for life and onehalf of such allowance continuing after death to the Participant's surviving spouse for the life of the spouse. A Participant may elect to receive the Participant's Retirement Allowance under a plan of payment other than "plan A" if either of the following is the case: the Participant is not married or either the Participant's spouse consents in writing to the Participant's election of a plan of payment other than "plan A" or the Board waives the requirement that the spouse consent. An; or a plan of payment providing for payment in a specified portion of the allowance continuing after the Participant s death to a former spouse is required by a court order issued under section or of the Ohio Revised 31