2007-2008 Bill 4876 Text of Previous Version (Apr. 2, 2008)

South Carolina General Assembly
117th Session, 2007-2008

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Bill 4876

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COMMITTEE REPORT

April 2, 2008

H. 4876

Introduced by Reps. Cooper and Cotty

S. Printed 4/2/08--H.

Read the first time March 25, 2008.

THE COMMITTEE ON WAYS AND MEANS

To whom was referred a Bill (H. 4876) to amend Sections 9-1-1020, 9-1-1620, 9-1-1680, and 9-1-1970, all as amended, Code of Laws of South Carolina, 1976, relating to the South Carolina Retirement System, etc., respectfully

REPORT:

That they have duly and carefully considered the same and recommend that the same do pass:

DANIEL T. COOPER for Committee.

A BILL

TO AMEND SECTIONS 9-1-1020, 9-1-1620, 9-1-1680, AND 9-1-1970, ALL AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE SOUTH CAROLINA RETIREMENT SYSTEM; BY ADDING SECTIONS 9-1-1625, 9-1-1665, 9-1-1975, AND 9-1-1980 SO AS TO COMPLY WITH THE QUALIFICATION REQUIREMENTS OF THE INTERNAL REVENUE CODE FOR THIS RETIREMENT SYSTEM WITH REGARD TO EMPLOYEE BENEFITS, EMPLOYER CONTRIBUTIONS, AND OTHER RELATED MATTERS PERTAINING TO PARTICIPATION IN AND PROCEDURES FOR THIS SYSTEM; TO AMEND SECTIONS 9-8-130, 9-8-190, BOTH AS AMENDED, AND 9-8-240, RELATING TO THE RETIREMENT SYSTEM FOR JUDGES AND SOLICITORS; BY ADDING SECTIONS 9-8-245, 9-8-250, 9-8-260, AND 9-8-270 SO AS TO COMPLY WITH THE QUALIFICATION REQUIREMENTS OF THE INTERNAL REVENUE CODE FOR THIS SYSTEM WITH REGARD TO EMPLOYEE BENEFITS, EMPLOYER CONTRIBUTIONS, AND OTHER RELATED MATTERS PERTAINING TO PARTICIPATION IN AND PROCEDURES FOR THIS SYSTEM; TO AMEND SECTIONS 9-9-70, AS AMENDED, 9-9-120, 9-9-180, AS AMENDED, AND 9-9-240, RELATING TO THE RETIREMENT SYSTEM FOR MEMBERS OF THE GENERAL ASSEMBLY; BY ADDING SECTIONS 9-9-245, 9-9-250, 9-9-255, AND 9-9-260 SO AS TO COMPLY WITH THE QUALIFICATION REQUIREMENTS OF THE INTERNAL REVENUE CODE FOR THIS RETIREMENT SYSTEM WITH REGARD TO EMPLOYEE BENEFITS, EMPLOYER CONTRIBUTIONS, AND OTHER RELATED MATTERS PERTAINING TO PARTICIPATION IN AND PROCEDURES FOR THIS SYSTEM; TO AMEND SECTIONS 9-11-150, 9-11-210, 9-11-270, ALL AS AMENDED, AND 9-11-350, RELATING TO THE SOUTH CAROLINA POLICE OFFICERS RETIREMENT SYSTEM; BY ADDING SECTIONS 9-11-155, 9-11-175, 9-11-355, AND 9-11-360 SO AS TO COMPLY WITH THE QUALIFICATION REQUIREMENTS OF THE INTERNAL REVENUE CODE FOR THIS RETIREMENT SYSTEM WITH REGARD TO EMPLOYEE BENEFITS, EMPLOYER CONTRIBUTIONS, AND OTHER RELATED MATTERS PERTAINING TO PARTICIPATION IN AND PROCEDURES FOR THIS SYSTEM; TO AMEND SECTION 9-16-20, AS AMENDED, RELATING TO THE INVESTMENT OF ASSETS OF THE SOUTH CAROLINA RETIREMENT SYSTEMS, SO AS TO COMPLY WITH THE QUALIFICATION REQUIREMENTS OF THE INTERNAL REVENUE CODE; TO AMEND TITLE 9 BY ADDING CHAPTER 12 SO AS TO PROVIDE FOR QUALIFIED EXCESS BENEFIT ARRANGEMENTS; TO AMEND SECTIONS 9-1-10, 9-1-1140, AND 9-1-1620, ALL AS AMENDED, RELATING TO THE SOUTH CAROLINA RETIREMENT SYSTEMS; BY ADDING SECTIONS 9-1-320, 9-1-1135, AND 9-1-1775 SO AS TO CODIFY CERTAIN REGULATIONS TO FURTHER IDENTIFY THE PLAN DOCUMENT FOR COMPLIANCE WITH THE QUALIFICATION REQUIREMENTS OF THE INTERNAL REVENUE CODE FOR THIS RETIREMENT SYSTEM; TO AMEND SECTION 9-8-70, AS AMENDED, RELATING TO THE RETIREMENT SYSTEM FOR JUDGES AND SOLICITORS; BY ADDING SECTIONS 9-8-35 AND 9-8-185 SO AS TO CODIFY CERTAIN REGULATIONS TO FURTHER IDENTIFY THE PLAN DOCUMENT FOR COMPLIANCE WITH THE QUALIFICATION REQUIREMENTS OF THE INTERNAL REVENUE CODE FOR THIS RETIREMENT SYSTEM; TO AMEND SECTION 9-9-70, AS AMENDED, RELATING TO THE RETIREMENT SYSTEM FOR MEMBERS OF THE GENERAL ASSEMBLY; BY ADDING SECTIONS 9-9-31 AND 9-9-175 TO FURTHER IDENTIFY THE PLAN DOCUMENT FOR COMPLIANCE WITH THE REQUIREMENTS OF THE INTERNAL REVENUE CODE FOR THIS SYSTEM; TO AMEND SECTIONS 9-11-50 AND 9-11-150, BOTH AS AMENDED, RELATING TO THE SOUTH CAROLINA POLICE OFFICERS RETIREMENT SYSTEM; BY ADDING SECTIONS 9-11-35, 9-11-125, AND 9-11-265 SO AS TO CODIFY CERTAIN REGULATIONS TO FURTHER IDENTIFY THE PLAN DOCUMENT FOR COMPLIANCE WITH THE QUALIFICATION REQUIREMENTS OF THE INTERNAL REVENUE CODE FOR THIS RETIREMENT SYSTEM; AND TO PROVIDE THAT UPON THE EFFECTIVE DATE OF THIS ACT, REGULATIONS 19-900 THROUGH 19-997 OF THE SOUTH CAROLINA CODE OF REGULATIONS SHALL HAVE NO APPLICATION TO THE OPERATION OF TITLE 9 OF THE 1976 CODE.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1. The fourth undesignated paragraph of Section 9-1-1020 of the 1976 Code, as last amended by Act 153 of 2005, is further amended to read:

"Each department and political subdivision shall pickup the employee contributions required by this section for all compensation paid on or after July 1, 1982, and the contributions so picked up shall be treated as employer contributions in determining federal tax treatment under the United States Internal Revenue Code; however, each department and political subdivision shall continue to withhold federal income taxes based upon these contributions until the Internal Revenue Service, or the federal courts, rule that, pursuant to Section 414(h) of the United States Internal Revenue Code, these contributions shall not be included as gross income of the employee until such time as they are distributed or made available. For this purpose, each department and political subdivision is deemed to have taken formal action on or before January 1, 2009, to provide that the contributions on behalf of its employees, although designated as employer contributions, shall be paid by the employer in lieu of employee contributions. The department and political subdivision shall pay these employee contributions from the same source of funds which is used in paying earnings to the employee. The department and political subdivision may pickup these contributions by a reduction in the cash salary of the employee.

The employee, however, must not be given the option of choosing to receive the contributed amount of the pickups directly instead of having them paid by the employer to the retirement system. Employee contributions picked up shall be treated for all purposes of this section in the same manner and to the extent as employee contributions made prior to the date picked up."

SECTION 2. Section 9-1-1620(A) of the 1976 Code, as last amended by Act 387 of 2000, is further amended to read:

"(A) No later than the date the first payment of a retirement allowance is due, a member shall elect a form of monthly payment from the following options:

Option A. The maximum retirement allowance payable under law for the life of the member. Upon the member's death, the member's designated beneficiary is entitled to receive any remaining member contributions.

Option B. A reduced retirement allowance payable during the retired member's life, which continues after the member's death for the life of the member's designated beneficiary or, if the member selects multiple beneficiaries, which continues after the member's death in equal shares to and for the life of each of two or more beneficiaries. The reduced retirement allowance payable under this option must be the actuarial equivalent of the maximum retirement allowance payable to the member under law, and if the member selects multiple beneficiaries, the benefit reduction factor must be based on the average age of the designated beneficiaries. If all of the designated beneficiaries predecease the member, then the member shall receive a retirement allowance equal to the maximum retirement allowance payable under law to the member. Any retirement allowance payable under this option, except an allowance for disability retirement pursuant to Section 9-1-1540, shall be subject to the incidental death benefit limitation upon the payment of survivorship benefits to a nonspouse beneficiary under Section 401(a)(9)(G) of the Internal Revenue Code and Treasury Regulation Section 1.401(a)(9)-6, Q&A-2.

Option C. A reduced retirement allowance payable during the retired member's life, which continues after the member's death at one-half the rate paid to the member for the life of the member's designated beneficiary or, if the member selects multiple beneficiaries, which continues after the member's death at one-half the rate paid to the member in equal shares to and for the life of each of two or more beneficiaries. The reduced retirement allowance payable under this option must be the actuarial equivalent of the maximum retirement allowance payable to the member under law, and if the member selects multiple beneficiaries, the benefit reduction factor must be based on the average age of the designated beneficiaries. If all of the designated beneficiaries predecease the member, then the member shall receive a retirement allowance equal to the maximum retirement allowance payable under law to the member."

SECTION 3. Article 13, Chapter 1, Title 9 of the 1976 Code is amended by adding:

"Section 9-1-1625. Compliance with Internal Revenue Code Section 401(a)(31).

(A) This section applies to distributions made on or after January 1, 1993. Notwithstanding any contrary provision or retirement law that would otherwise limit a distributee's election under this chapter, a distributee may elect, at the time and in the manner prescribed by the board, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

(B) Effective January 1, 2007, and notwithstanding anything in this chapter to the contrary that otherwise would limit a distributee's election under this section, and to the extent allowed under the applicable provisions of the Internal Revenue Code and the Treasury Regulations, a distributee who is a designated beneficiary, but not a surviving spouse, spouse or former spouse alternate payee may elect, at the time and in the manner prescribed by the board, to have all or part of his benefit that qualifies as an eligible rollover distribution paid in a direct trustee-to-trustee transfer to an eligible retirement plan that is an individual retirement plan described in clause (i) or (ii) of Internal Revenue Code Section 402(c)(8)(B). If such a transfer is made:

(1) the transfer shall be treated as an eligible distribution;

(2) the individual retirement plan shall be treated as an inherited individual retirement account or individual retirement annuity within the meaning of Internal Revenue Code Section 408(d)(3)(C); and

(3) Internal Revenue Code Section 401(a)(9)(B) other than clause (iv) thereof shall apply to such individual retirement plan.

(C) A 'designated beneficiary' is an individual who is designated as a beneficiary under this chapter and is the designated beneficiary under Internal Revenue Code Section 401(a)(9) and Section 1.401(a)(9)-1, Q&A-4 of the Treasury Regulations. An estate or revocable trust is not considered to be a designated beneficiary for purposes of Internal Revenue Code Section 401(a)(9).

(D) An 'eligible rollover distribution' is 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:

(1) any distribution that is one of a series of substantially equal periodic payments made not less frequently than annually 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 years or more;

(2) any distribution to the extent such distribution is required under Internal Revenue Code Section 401(a)(9); and

(3) any hardship distribution.

Effective January 1, 2002, a portion of a 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, such portion may be transferred only to an individual retirement account or annuity described in Internal Revenue Code Section 408(a) or (b), or in a direct trustee-to-trustee rollover to a qualified trust under Internal Revenue Code Section 401(a) or 403(a) that is part of a defined contribution or defined benefit plan, or to an annuity contract described in Internal Revenue Code Section 403(b), so long as such trust or annuity contract separately accounts for amounts so transferred, including separate accounting for the portion of such distribution that is includible in gross income and the portion of such distribution that in not includible. Effective January 1, 2008, an eligible rollover distribution also shall mean a qualified rollover contribution to a Roth IRA within the meaning of Internal Revenue Code Section 408A.

(E) Effective January 1, 2002, unless otherwise stated an 'eligible retirement plan' is:

(1) a plan eligible under Internal Revenue Code Section 457(b) that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state that agrees to separately account for amounts transferred into the plan from the system;

(2) an individual retirement account described in Internal Revenue Code Section 408(a);

(3) an individual retirement annuity described in Internal Revenue Code Section 408(b);

(4) an annuity plan described in Internal Revenue Code Section 403(a);

(5) an annuity contract described in Internal Revenue Code Section 403(b);

(6) a qualified trust described in Internal Revenue Code Section 401(a) that accepts the distributee's eligible rollover distribution; or

(7) effective January 1, 2008, a Roth IRA described in Internal Revenue Code Section 408A.

(F) 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 domestic relations order, as defined in Internal Revenue Code Section 414(p).

(G) A 'distributee' includes 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 Internal Revenue Code Section 414(p). Effective January 1, 2007, it further includes a nonspouse beneficiary who is a designated beneficiary as defined by Internal Revenue Code Section 401(a)(9)(E). 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.

(H) A 'direct rollover' is a payment by the system to the eligible retirement plan specified by the distributee."

SECTION 4. Article 13, Chapter 1, Title 9 of the 1976 Code is amended by adding:

"Section 9-1-1665. Compliance with Internal Revenue Code Section 401(a)(9).

(A) Effective as of January 1, 1989, the system will pay all benefits in accordance with the requirements of Section 401(a)(9) of the Internal Revenue Code, including the incidental death benefit requirement in Section 401(a)(9)(G), and the applicable Treasury Regulations and Internal Revenue Service Rulings and other interpretations issued thereunder, including Treasury Regulations Sections 1.401(a)(9)-2 through 1.401(a)(9)-9. The provisions of this section shall override any distribution options that are inconsistent with Section 401(a)(9) to the extent that those distribution options are not grandfathered under Treasury Regulation Section 1.401(a)(9)-6, Q&A-16.

(B) Each member's entire benefit shall be distributed to the member, beginning no later than the required beginning date, over the member's lifetime or the joint lives of the member and a designated beneficiary, or over a period not extending beyond the member's life expectancy or the joint life expectancies of the member and a designated beneficiary. If a member fails to apply for retirement benefits by his required beginning date, the board shall begin distributing the benefit as required by this chapter.

(1) For purposes of this section, the 'required beginning date' is April first of the calendar year after the later of the following:

(a) the calendar year in which the member reaches age seventy and one-half years of age; or

(b) the calendar year in which the member retires.

(2) For purposes of this section, a 'designated beneficiary' means any individual designated as a co-beneficiary by the member under this chapter. If the member designates a trust as a co-beneficiary, the individual beneficiaries of the trust shall be treated as designated beneficiaries if the trust satisfies the requirement set forth in Treasury Regulation Section 1.401(a)(9)-3.

(3) Payment of retirement benefits, for those members who are eligible to receive retirement benefits and who have not applied for such pursuant to the provisions of this chapter, and who continue membership after attaining seventy and one-half years of age, shall commence on the effective date of retirement.

(C) If a retired member dies after benefits payments have begun or are required to begin under subsection (B) of this section, any survivor benefits shall be distributed at least as rapidly as under the distribution method being used at the member's death.

(D) If an active or inactive member dies before benefit payments have begun or are required to begin under subsection (B) of this section, any death benefits shall be distributed by December thirty-first of the calendar year that contains the fifth anniversary of the member's death. However, the five-year rule shall not apply to any death benefit that is payable to a member's designated beneficiary, if:

(1) the benefit is distributed over the designated beneficiary's lifetime or over a period not extending beyond the designated beneficiary's life expectancy; and

(2) the distributions begin no later than December thirty-first of the calendar year that contains the first anniversary of the member's death."

SECTION 5. Section 9-1-1680 of the 1976 Code, as last amended by Act 16 of 2001, is further amended to read:

"Section 9-1-1680. Except as provided in Section 9-18-10, and related sections, Section 20-7-1315 and Section 8-1-115 and subject to the doctrine of constructive trust ex maleficio, and subject to income tax levies imposed pursuant to state or federal law and distributions made pursuant to the federal Pension Protection Act of 2006, the right of a person to an annuity or a retirement allowance or to the return of contributions, an annuity, or retirement allowance itself, any optional benefit, or any other right accrued or accruing to any person under the provisions of this chapter, and the monies of the system created under the provisions of this chapter or any private retirement system operated by a municipality, are exempted from any state or municipal tax, except the taxes imposed pursuant to Chapters 6 and 16 of Title 12, and exempted from levy and sale, garnishment, attachment, or any other process and are unassignable except as specifically otherwise provided in this chapter. This section does not apply to any authorized deduction from a retirement allowance."

SECTION 6. Section 9-1-1970 of the 1976 Code, as last amended by Act 48 of 1995, is further amended to read:

"Section 9-1-1970. Effective as of January 1, 1996, the annual compensation of a member taken into account for determining all benefits provided under this retirement system is subject to the limitations set forth in Section 401(a)(17) of the Internal Revenue Code of 1986 and any regulations promulgated thereunder, as adjusted for any cost-of-living increases in accordance with Section 401(a)(17)(B) of the Internal Revenue Code. Annual compensation means compensation during the plan year or such other consecutive twelve-month period over which compensation is otherwise determined under the retirement system hereinafter referred to as the determination period. The cost-of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year. However, the limitation on compensation does not apply to the compensation of an individual who became a member of this retirement system before January 1, 1996."

SECTION 7. Chapter 1, Title 9 of the 1976 Code is amended by adding:

"Section 9-1-1975. Compliance with USERRA.

Effective December 12, 1994, and notwithstanding any provision in this chapter to the contrary, contributions, benefits, and service credit with respect to qualified military service shall be provided in accordance with Section 414(u) of the Internal Revenue Code."

SECTION 8. Chapter 1, Title 9 of the 1976 Code is amended by adding:

"Section 9-1-1980. Compliance with Internal Revenue Code Section 415.

(A) Effective as of July 1, 1989, member contributions paid to, and retirement benefits paid from, the system may not exceed the annual limits on contributions and benefits, respectively, allowed by Internal Revenue Code Section 415. For purposes of applying these limits, the definition of compensation where applicable shall be compensation as defined in Treasury Regulation Section 1.415(c)-2(d)(3), or successor regulation; provided, however, that the definition of compensation will exclude member contributions picked up under Internal Revenue Code Section 414(h)(2), and for plan years beginning after December 31, 1997, compensation shall include the amount of any elective deferrals, as defined in Internal Revenue Code Section 402(g)(3), and any amount contributed or deferred by the employer at the election of the member and which is not includible in the gross income of the member by reason of Internal Revenue Code Section 125 or 457, and, for plan years beginning on and after January 1, 2001, Internal Revenue Code Section 132(f)(4).

(B) Before January 1, 1995, a member may not receive an annual benefit that exceeds the limits specified in Internal Revenue Code Section 415(b), subject to the applicable adjustments in that section. On and after January 1, 1995, a member may not receive an annual benefit that exceeds the dollar amount specified in Internal Revenue Code Section 415(b)(1)(A), subject to the applicable adjustments in Internal Revenue Code Section 415(b).

(C) For purposes of applying the limits under Internal Revenue Code Section 415(b), hereinafter referred to as 'limit', the following shall apply:

(1) prior to January 1, 2009, cost-of-living adjustments under Section 9-1-1810, shall be taken into consideration when determining a member's applicable limit;

(2) on or after January 1, 2009, with respect to a member who does not receive a portion of his annual benefit in a lump sum:

(a) a member's applicable limit shall be applied to the member's annual benefit in the first limitation year without regard to any automatic cost-of-living increases pursuant to Section 9-1-1810;

(b) to the extent the member's annual benefit equals or exceeds the limit, the member shall no longer be eligible for cost-of-living increases until such time as the benefit plus the accumulated increases are less than the limit;

(c) thereafter, in a subsequent limitation year, the member's annual benefit including any automatic cost-of-living increase applicable pursuant to Section 9-1-1810 shall be tested under the then applicable benefit limit including any adjustment to the Internal Revenue Code Section 415(b)(1)(A) dollar limit under Internal Revenue Code Section 415(d) and the regulations thereunder;

(3) on and after January 1, 2009, with respect to a member who receives a portion of the member's annual benefit in a lump sum, a member's applicable limit shall be applied taking into consideration automatic cost-of-living increases under Section 9-1-1810 as required by Internal Revenue Code Section 415(b) and applicable Treasury Regulations;

(4) on and after January 1, 1995, in no event shall a member's annual benefit payable under the system in any limitation year be greater than the limit applicable at the annuity starting date, as increased in subsequent years pursuant to Internal Revenue Code Section 415(d) and the regulations thereunder. If the form of benefit without regard to the automatic benefit increase feature is not a straight life or a qualified joint and survivor annuity, then the preceding sentence is applied by adjusting the form of benefit to an actuarially equivalent straight life annuity benefit that is determined using the following assumptions and that take into account the death benefits under the form of benefit:

(a) for a benefit paid in a form to which Internal Revenue Code Section 417(e)(3) does not apply, the actuarially equivalent straight life annuity benefit which is the greater of (or the reduced 415(b) limit applicable at the annuity starting date which is the lesser of when adjusted in accordance with the following assumptions):

(i) the annual amount of the straight life annuity, if any, payable to the member under the plan commencing at the same annuity starting date as the form of benefit payable to the member; or

(ii) the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the form of benefit payable to the member, computed using (aa) a five percent interest assumption or the applicable statutory interest assumption and (bb) the applicable mortality table described in Treasury Regulation Section 1.417(e)-1(d)(2) which is the mortality table specified in Revenue Ruling 98-1 for years prior to 2003 or, for subsequent years, in Revenue Ruling 2001-62 or any subsequent Revenue Ruling modifying the applicable provisions of Revenue Ruling 2001-62;

(b) for a benefit paid in a form to which Internal Revenue Code Section 417(e)(3) applies, the actuarially equivalent straight life annuity benefit which is the greatest of (or the reduced 415(b) limit applicable at the annuity starting date which is the least of when adjusted in accordance with the following assumptions):

(i) the annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using the interest rate and mortality table, or tabular factor, specified in the plan for actuarial experience;

(ii) the annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using (aa) a five and one-half percent interest assumption or the applicable statutory interest assumption and (bb) the applicable mortality table for the distribution under Treasury Regulation Section 1.417(e) -1(d)(2) which is the mortality table specified in Revenue Ruling 98-1 for years prior to 2003 or, for subsequent years, in Revenue Ruling 2001-62 or any subsequent Revenue Ruling modifying the applicable provisions of Revenue Ruling 2001-62; or

(iii) the annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using (aa) the applicable interest rate for the distribution under Treasury Regulation Section 1.417(e)-1(d)(3) which, prior to July 1, 2007, is the thirty-year treasury rate in effect for the month prior to retirement, and, on and after July 1, 2007, is the thirty-year treasury rate in effect for the first day of the plan year with a one-year stabilization period and (bb) the applicable mortality table for the distribution under Treasury Regulation Section 1.417(e)-1(d)(2), which is the mortality table specified in Revenue Ruling 98-1 for years prior to 2003 or, for subsequent years, in Revenue Ruling 2001-62 or any subsequent Revenue Ruling modifying the applicable provisions of Revenue Ruling 2001-62, divided by 1.05; and

(5) The member's annual benefit shall be adjusted as provided by Internal Revenue Code Section 415(b)(2)(B) and related Treasury regulations by taking into consideration after-tax contributions and rollover and transfer contributions made by the member.

(D) Notwithstanding any other provision of law to the contrary, the system may modify a request by a member to make a contribution to the system if the amount of the contribution would exceed the limits provided in Internal Revenue Code Section 415 by using the following methods:

(1) if the law requires a lump sum payment for the purchase of service credit, the board may establish a periodic payment plan for the member to avoid a contribution in excess of the limits under Internal Revenue Code Sections 415(c) or 415(n);

(2) if payment pursuant to item (1) shall not avoid a contribution in excess of the limits imposed by Internal Revenue Code Section 415(c), the system may either reduce the member's contribution to an amount within the limits of that section or refuse the member's contribution;

(3) effective for permissive service credit contributions made in years beginning after December 31, 1997, if a member makes one or more contributions to purchase permissive service credit under the system, then the requirements of this section shall be treated as met only if:

(a) the requirements of Internal Revenue Code Section 415(b) are met, determined by treating the accrued benefit derived from all such contributions as an annual benefit for purposes of Internal Revenue Code Section 415(b); or

(b) the requirements of Internal Revenue Code Section 415(c) are met, determined by treating all such contributions as annual additions for purposes of Internal Revenue Code Section 415(c).

For purposes of applying subitem (a) the system will not fail to meet the reduced limit under Internal Revenue Code Section 415(b)(2)(C) solely by reason of this subsection (D), and for purposes of applying subitem (b) the system will not fail to meet the percentage limitation under Internal Revenue Code Section 415(c)(1)(B) solely by reason of this subsection (D);

(4) for purposes of subsection (D) the term 'permissive service credit' means service credit:

(a) recognized by the system for purposes of calculating a member's benefit under the system;

(b) which such member has not received under the system; and

(c) which such member may receive only by making a voluntary additional contribution, in an amount determined under the system, which does not exceed the amount necessary to fund the benefit attributable to such service credit.

Effective for permissive service credit contributions made in years beginning after December 31, 1997, such term may include service credit for periods for which there is no performance of service, and, notwithstanding subitem (b), may include service credited in order to provide an increased benefit for service credit which a member is receiving under the system;

(5) the system will fail to meet the requirements of this subsection (D) if:

(a) more than five years of nonqualified service credit are taken into account for purposes of this subsection (D); or

(b) any nonqualified service credit is taken into account under this subsection (D) before the member has at least five years of participation under the system;

(6) for purposes of item (5), effective for permissive service credit contributions made in years beginning after December 31, 1997, the term 'nonqualified service credit' means permissive service credit other than that allowed with respect to:

(a) service including parental, medical, sabbatical, and similar leave, as an employee of the government of the United States, any state or political subdivision thereof, or any agency or instrumentality of any of the foregoing other than military service or service for credit which was obtained as a result of a repayment described in Internal Revenue Code Section 415(k)(3);

(b) service including parental, medical, sabbatical, and similar leave, as an employee other than as an employee described in subitem (a), of an education organization described in Internal Revenue Code Section 170(b)(1)(A)(ii) which is a public, private, or sectarian school which provides elementary or secondary education through grade twelve, or a comparable level of education, as determined under the applicable law of the jurisdiction in which the service was performed; provided, however, that in the case of a private or sectarian school, only teaching service will not be treated as nonqualified service;

(d) military service, other than qualified military service under Internal Revenue Code Section 414(u), recognized by such governmental plan.

In the case of service described in subitem (a), (b), or (c), such service shall be nonqualified service if recognition of such service would cause a member to receive a retirement benefit for the same service under more than one plan;

(7) in the case of a trustee-to-trustee transfer after December 31, 2001, to which Internal Revenue Code Section 403(b)(13)(A) or 457(e)(17)(A) applies, without regard to whether the transfer is made between plans maintained by the same employer:

(a) the limitations of item (5) shall not apply in determining whether the transfer is for the purchase of permissive service credit;

(b) the distribution rules applicable under federal law to the system will apply to such amounts and any benefits attributable to such amounts;

(8) for an eligible member, the limitation of Internal Revenue Code Section 415(c)(1) shall not be applied to reduce the amount of permissive service credit which may be purchased to an amount less than the amount which was allowed to be purchased under the terms of the South Carolina Retirement System as in effect on August 5, 1997. For purposes of this item (8), an eligible member is an individual who first became a member in the system before July 1, 1998."

SECTION 9. Section 9-8-130(4) of the 1976 Code, as last amended by Act 249 of 2004, is further amended to read:

"(4) Each department and political subdivision shall pickup the employee contributions required by this section for all compensation paid on or after July 1, 1982, and the contributions so picked up shall be treated as employer contributions in determining federal tax treatment under the United States Internal Revenue Code; however, each department and political subdivision shall continue to withhold federal income taxes based upon these contributions until the Internal Revenue Service, or the federal courts, rule that, pursuant to Section 414(h) of the United States Internal Revenue Code, these contributions shall not be included as gross income of the employee until such time as they are distributed or made available. For this purpose, each department and political subdivision is deemed to have taken formal action on or before January 1, 2009, to provide that the contributions on behalf of its employees, although designated as employer contributions, shall be paid by the employer in lieu of employee contributions. The department and political subdivision shall pay these employee contributions from the same source of funds which is used in paying earnings to the employee. The department and political subdivision may pickup these contributions by a reduction in the cash salary of the employee. The employee, however, must not be given the option of choosing to receive the contributed amount of the pickups directly instead of having them paid by the employer to the retirement system. Employee contributions picked up shall be treated for all purposes of this section in the same manner and to the extent as employee contributions made prior to the date picked up."

SECTION 10. Section 9-8-190 of the 1976 Code, as last amended by Act 16 of 2001, is further amended to read:

"Section 9-8-190. Except as provided in Section 9-18-10, and related sections, Section 20-7-1315 and Section 8-1-115 and subject to the doctrine of constructive trust ex maleficio, and subject to income tax levies imposed pursuant to state or federal law and distributions made pursuant to the federal Pension Protection Act of 2006, the right of a person to a retirement allowance or to the return of contributions, a retirement allowance itself, any optional allowance or payment on death or any other right accrued or accruing to any person under the provisions of this chapter, and the monies of the system are exempted from state or municipal tax, except the taxes imposed pursuant to Chapters 6 and 16 of Title 12, and exempted from levy and sale, garnishment, attachment, or any other process and are unassignable except as otherwise provided in this chapter. This section does not apply to any authorized deduction from a retirement allowance."

SECTION 11. Section 9-8-240 of the 1976 Code, as added by Act 48 of 1995, is amended to read:

"Section 9-8-240. Effective as of January 1, 1996, the annual compensation of a member taken into account for determining all benefits provided under this retirement system is subject to the limitations set forth in Section 401(a)(17) of the Internal Revenue Code of 1986 and any regulations promulgated thereunder, as adjusted for any cost-of-living increases in accordance with Section 401(a)(17)(B) of the Internal Revenue Code. Annual compensation means compensation during the plan year or such other consecutive twelve-month period over which compensation is otherwise determined under the retirement system, hereinafter referred to as the determination period. The cost-of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year. However, the limitation on compensation does not apply to the compensation of an individual who became a member of this retirement system before January 1, 1996."

SECTION 12. Chapter 8, Title 9 of the 1976 Code is amended by adding:

"Section 9-8-245. Compliance with USERRA.

SECTION 13. Chapter 8, Title 9 of the 1976 Code is amended by adding:

"Section 9-8-250. Compliance with Internal Revenue Code Section 401(a)(31).

(1) the transfer shall be treated as an eligible rollover distribution;

(3) Internal Revenue Code Section 401(a)(9)(B) other than clause (iv) thereof, shall apply to such individual retirement plan. (C) A 'designated beneficiary' is an individual who is designated as a beneficiary under this chapter and is the designated beneficiary under Internal Revenue Code Section 401(a)(9) and Section 1.401(a)(9)-1, Q&A-4 of the Treasury Regulations. An estate or revocable trust is not considered to be a designated beneficiary for purposes of Internal Revenue Code Section 401(a)(9).

(D) An 'eligible rollover distribution' is 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:

(2) any distribution to the extent such distribution is required under Internal Revenue Code Section 401(a)(9); and

(3) any hardship distribution.

Effective January 1, 2002, a portion of a 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, such portion may be transferred only to an individual retirement account or annuity described in Internal Revenue Code Section 408(a) or (b), or in a direct trustee-to-trustee rollover to a qualified trust under Internal Revenue Code Section 401(a) or 403(a) that is part of a defined contribution or defined benefit plan, or to an annuity contract described in Internal Revenue Code Section 403(b), so long as such trust or annuity contract separately accounts for amounts so transferred, including separate accounting for the portion of such distribution that is includible in gross income and the portion of such distribution that is not includible. Effective January 1, 2008, an eligible rollover distribution also shall mean a qualified rollover contribution to a Roth IRA within the meaning of Internal Revenue Code Section 408A.

(E) Effective January 1, 2002, unless otherwise stated an 'eligible retirement plan' is:

(2) an individual retirement account described in Internal Revenue Code Section 408(a);

(3) an individual retirement annuity described in Internal Revenue Code Section 408(b);

(4) an annuity plan described in Internal Revenue Code Section 403(a);

(5) an annuity contract described in Internal Revenue Code Section 403(b);

(6) a qualified trust described in Internal Revenue Code Section 401(a) that accepts the distributee's eligible rollover distribution; or

(7) effective January 1, 2008, a Roth IRA described in Internal Revenue Code Section 408A.

(H) A direct rollover is a payment by the system to the eligible retirement plan specified by the distributee."

SECTION 14. Chapter 8, Title 9 of the 1976 Code is amended by adding:

"Section 9-8-260. Compliance with Internal Revenue Code Section 401(a)(9).

(A) Effective as of January 1, 1989, the system shall pay all benefits in accordance with the requirements of Section 401(a)(9) of the Internal Revenue Code, including the incidental death benefit requirement in Section 401(a)(9)(G), and the applicable Treasury Regulations and Internal Revenue Service Rulings and other interpretations issued thereunder, including Treasury Regulations Sections 1.401(a)(9)-2 through 1.401(a)(9)-9. The provisions of this section shall override any distribution options that are inconsistent with Section 401(a)(9) of the Internal Revenue Code to the extent that those distribution options are not grandfathered under Treasury Regulation Section 1.401(a)(9)-6, Q&A-16.

(1) For purposes of this section, the 'required beginning date' is April first of the calendar year after the later of the following:

(a) the calendar year in which the member reaches age seventy and one-half years of age; or

(b) the calendar year in which the member retires.

(1) the benefit is distributed over the designated beneficiary's lifetime or over a period not extending beyond the designated beneficiary's life expectancy; and

(2) the distributions begin no later than December thirty-first of the calendar year that contains the first anniversary of the member's death."

SECTION 15. Chapter 8, Title 9 of the 1976 Code is amended by adding:

"Section 9-8-270. Compliance with Internal Revenue Code Section 415.

(A) Effective as of July 1, 1989, member contributions paid to, and retirement benefits paid from, the system may not exceed the annual limits on contributions and benefits, respectively, allowed by Internal Revenue Code Section 415. For purposes of applying these limits, the definition of compensation where applicable will be compensation as defined in Treasury Regulation Section 1.415(c)-2(d)(3), or successor regulation; provided, however, that the definition of compensation will exclude member contributions picked up under Internal Revenue Code Section 414(h)(2), and for plan years beginning after December 31, 1997, compensation will include the amount of any elective deferrals, as defined in Internal Revenue Code Section 402(g)(3), and any amount contributed or deferred by the employer at the election of the member and which is not includible in the gross income of the member by reason of Internal Revenue Code Section 125 or 457, and, for plan years beginning on and after January 1, 2001, Internal Revenue Code Section 132(f)(4).

(C) For purposes of applying the limits under Internal Revenue Code Section 415(b), hereinafter referred to as 'limit', the following shall apply:

(1) prior to January 1, 2009, cost-of-living adjustments under Section 9-8-90 will be taken into consideration when determining a member's applicable limit;

(2) on and after January 1, 2009, with respect to a member who does not receive a portion of the member's annual benefit in a lump sum:

(a) a member's applicable limit shall be applied to the member's annual benefit in the first limitation year without regard to any automatic cost-of living increases under Section 9-8-90;

(b) to the extent the member's annual benefit equals or exceeds the limit, the member will no longer be eligible for cost-of-living increases until such time as the benefit plus the accumulated increases are less than the limit; and

(c) thereafter, in any subsequent limitation year, the member's annual benefit, including any automatic cost-of-living increase applicable under Section 9-8-90, shall be tested under the then applicable benefit limit including any adjustment to the Internal Revenue Code Section 415(b)(1)(A) dollar limit under Internal Revenue Code Section 415(d) and the regulations thereunder;

(3) on and after January 1, 2009, with respect to a member who receives a portion of the member's annual benefit in a lump sum, a member's applicable limit shall be applied taking into consideration automatic cost-of-living increases under Section 9-8-90 as required by Internal Revenue Code Section 415(b) and applicable Treasury Regulations;

(a) for a benefit paid in a form to which Internal Revenue Code Section 417(e)(3) does not apply, the actuarially equivalent straight life annuity benefit which is the greater of (or the reduced Internal Revenue Code Section 415(b) limit applicable at the annuity starting date which is the lesser of when adjusted in accordance with the following assumptions):

(i) the annual amount of the straight life annuity if any payable to the member under the plan commencing at the same annuity starting date as the form of benefit payable to the member; or

(ii) the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the form of benefit payable to the member, computed using (aa) a five percent interest assumption or the applicable statutory interest assumption and (bb)the applicable mortality table described in Treasury Regulation Section 1.417(e)-1(d)(2) which is the mortality table specified in Revenue Ruling 98-1 for years prior to 2003 or, for subsequent years, in Revenue Ruling 2001-62 or any subsequent Revenue Ruling modifying the applicable provisions of Revenue Ruling 2001-62; or

(b) for a benefit paid in a form to which Internal Revenue Code Section 417(e)(3) applies, the actuarially equivalent straight life annuity benefit which is the greatest of (or the reduced Internal Revenue Code Section 415(b) limit applicable at the annuity starting date which is the least of when adjusted in accordance with the following assumptions):

(ii) the annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using (aa) a five and one-half percent interest assumption or the applicable statutory interest assumption and (bb) the applicable mortality table for the distribution under Treasury Regulation Section 1.417(e)-1(d)(2) which is the mortality table specified in Revenue Ruling 98-1 for years prior to 2003 or, for subsequent years, in Revenue Ruling 2001-62 or any subsequent Revenue Ruling modifying the applicable provisions of Revenue Ruling 2001-62; or

(iii) the annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable computed using (aa) the applicable interest rate for the distribution under Treasury Regulation Section 1.417(e)-1(d)(3) which, prior to July 1, 2007, is the thirty-year treasury rate in effect for the month prior to retirement, and on and after July 1, 2007, is the thirty-year treasury rate in effect for the first day of the plan year with a one-year stabilization period, and (bb) the applicable mortality table for the distribution under Treasury Regulation Section 1.417(e)-1(d)(2) which is the mortality table specified in Revenue Ruling 98-1 for years prior to 2003 or, for subsequent years, in Revenue Ruling 2001-62 or any subsequent Revenue Ruling modifying the applicable provisions of Revenue Ruling 2001-62, divided by 1.05; and

(5) the member's annual benefit will be adjusted as provided by Internal Revenue Code Section 415(b)(2)(B) and related treasury regulations by taking into consideration after-tax contributions and rollover and transfer contributions made by the member.

(b) the requirements of Internal Revenue Code Section 415(c) are met, determined by treating all such contributions as annual additions for purposes of Code Section 415(c).

For purposes of applying subitem (a) the system shall not fail to meet the reduced limit under Internal Revenue Code Section 415(b)(2)(C) solely by reason of this subsection (D), and for purposes of applying subitem (b) the system shall not fail to meet the percentage limitation under Internal Revenue Code Section 415(c)(1)(B) solely by reason of this subsection (D);

(4) for purposes of subsection (D), the term 'permissive service credit' means service credit:

(a) recognized by the system for purposes of calculating a member's benefit under the system;

(b) which such member has not received under the system; and

(5) the system shall fail to meet the requirements of this subsection (D) if:

(a) more than five years of nonqualified service credit are taken into account for purposes of this subsection (D); or

(b) any nonqualified service credit is taken into account under this subsection (D) before the member has at least five years of participation under the system;

(a) service including parental, medical, sabbatical, and similar leave as an employee of the government of the United States, any state or political subdivision thereof, or any agency or instrumentality of any of the foregoing other than military service or service for credit which was obtained as a result of a repayment described in Internal Revenue Code Section 415(k)(3);

(b) service including parental, medical, sabbatical, and similar leave as an employee, other than as an employee described in subitem (a), of an education organization described in Internal Revenue Code Section 170(b)(1)(A)(ii) which is a public, private, or sectarian school which provides elementary or secondary education through grade twelve, or a comparable level of education, as determined under the applicable law of the jurisdiction in which the service was performed; provided, however, that in the case of a private or sectarian school, only teaching service will not be treated as nonqualified service;

(d) military service, other than qualified military service under Internal Revenue Code Section 414(u), recognized by such governmental plan.

(a) the limitations of item (5) shall not apply in determining whether the transfer is for the purchase of permissive service credit; and

(b) the distribution rules applicable under federal law to the system will apply to such amounts and any benefits attributable to such amounts;

(8) for an eligible member, the limitation of Internal Revenue Code Section 415(c)(1) shall not be applied to reduce the amount of permissive service credit which may be purchased to an amount less than the amount which was allowed to be purchased under the terms of the Retirement System for Judges and Solicitors as in effect on August 5, 1997. For purposes of this item, an eligible member is an individual who first became a member in the system before July 1, 1998."

SECTION 16. Section 9-9-70 of the 1976 Code, as last amended by Act 458 of 1996, is further amended to read:

"Section 9-9-70. (A) Until the first payment on account of a retirement allowance becomes normally due, any member or beneficiary may elect, by filing with the system, to convert the retirement allowance otherwise payable on his account after retirement into a retirement allowance of equivalent actuarial value under one of the optional forms named below, the retirement allowance under the option selected being due and payable on the date of retirement.:

Option 1. A reduced retirement allowance payable during the retired member's life, with the provision that it continues after his death to and for the life of the beneficiary, or the trustee of the beneficiary nominated by him by written designation duly acknowledged and filed with the board at the time of retirement if the person survives him. Any retirement allowance payable under this option, except an allowance for disability retirement pursuant to Section 9-9-65, shall be subject to the incidental death benefit limitation upon the payment of survivorship benefits to a nonspouse beneficiary under Section 401(a)(9)(G) of the Internal Revenue Code and Treasury Regulation Section 1.401(a)(9)(9)-6, Q&A-2;

Option 2. A reduced retirement allowance payable during the retired member's life, with the provision that it continues after his death at one-half the rate paid to him to and for the life of the beneficiary or the trustee of the beneficiary nominated by him by written designation duly acknowledged and filed with the board at the time of retirement, if the person survives him;

Option 3. A member may elect either Option 1 or 2 with the added provision that, if the designated beneficiary predeceases the member, the retirement allowance payable to the member after the designated beneficiary's death must be equal to the retirement allowance which would have been payable had the member not elected the option;

Option 4. A member may elect Option 1 or 2 with the added provision that the reduced retirement allowance after his death is payable in equal shares to and for the life of each of two or more beneficiaries, or to the trustee or trustees of the beneficiaries, for so long as each beneficiary survives him. The benefit reduction factor must be based on the average age of the beneficiaries.

(B) A member having elected Option 1, 2, or 3 and nominated his spouse to receive a retirement allowance upon the member's death may revoke the prior nomination and elect a new option only after the death of his spouse, a divorce, or other change in the member's marital status. This change may be accomplished only by filing with the system:

~~(a)~~(1) the form prescribed by the system, appropriately completed, signed by the member and notarized, that simultaneously both revokes the prior nomination and elects a new option and contains such other information as the system requires,; or

~~(b)~~(2) a writing signed by the member and notarized that makes the same revocation and election and contains the identical information required by the prescribed form. The revocation and election of a new option is effective on the first day of the month in which the new option is elected. The retirement allowance payable following the election of a new option allowed by this paragraph must be computed upon the actuarial equivalent of the retirement allowance in effect immediately before the effective date of the new option. The revocation of the prior nomination and the election of a new option after the death of the member's spouse must be made before the first anniversary of the death of the spouse.

(C) A member may, upon occurrence of a change in his marital status after the date of retirement, revoke the form of payment elected and elect a new option effective on the first day of the month in which the new option is elected, providing for a retirement allowance computed to be the actuarial equivalent of the retirement allowance in effect immediately prior to the effective date of the new option.

(D) The board may approve a five-year pay-out plan developed by the actuary on the basis of the total retirement allowance for surviving beneficiaries, other than a spouse."

SECTION 17. Section 9-9-120(6) of the 1976 Code is amended to read:

"(6) Each department and political subdivision shall pickup the employee contributions required by this section for all compensation paid on or after July 1, 1982, and the contributions so picked up shall be treated as employer contributions in determining federal tax treatment under the United States Internal Revenue Code; however, each department and political subdivision shall continue to withhold federal income taxes based upon these contributions until the Internal Revenue Service, or the federal courts, rule that, pursuant to Section 414(h) of the United States Internal Revenue Code, these contributions shall not be included as gross income of the employee until such time as they are distributed or made available. For this purpose, each department and political subdivision is deemed to have taken formal action on or before January 1, 2009, to provide that the contributions on behalf of its employees, although designated as employer contributions, shall be paid by the employer in lieu of employee contributions. The department and political subdivision shall pay these employee contributions from the same source of funds which is used in paying earnings to the employee. The department and political subdivision may pickup these contributions by a reduction in the cash salary of the employee. The employee, however, must not be given the option of choosing to receive the contributed amount of the pickups directly instead of having them paid by the employer to the retirement system. Employee contributions picked up shall be treated for all purposes of this section in the same manner and to the extent as employee contributions made prior to the date picked up."

SECTION 18. Section 9-9-180 of the 1976 Code, as last amended by Act 16 of 2001, is further amended to read:

"Section 9-9-180. Except as provided in Section 9-18-10, and related sections, Section 20-7-1315 and Section 8-1-115 and subject to the doctrine of constructive trust ex maleficio, and subject to income tax levies imposed pursuant to state or federal law and distributions made pursuant to the federal Pension Protection Act of 2006, the right of a person to a retirement allowance or to the return of contributions, a retirement allowance itself, any optional allowance or payment on death or any other right accrued or accruing to any person under the provisions of this chapter, and the monies of the system are exempted from any state or municipal tax, except the taxes imposed pursuant to Chapters 6 and 16 of Title 12, and exempted from levy and sale, garnishment, attachment, or any other process and are unassignable except as specifically otherwise provided in this chapter. This section does not apply to any authorized deduction from a retirement allowance."

SECTION 19. Section 9-9-240 of the 1976 Code, as added by Act 48 of 1995, is amended to read:

"Section 9-9-240. Effective as of January 1, 1996, the annual compensation of a member taken into account for determining all benefits provided under this retirement system is subject to the limitations set forth in Section 401(a)(17) of the Internal Revenue Code of 1986 and any regulations promulgated thereunder, as adjusted for any cost-of-living increases in accordance with Section 401(a)(17)(B) of the Internal Revenue Code. Annual compensation means compensation during the plan year or such other consecutive twelve-month period over which compensation is otherwise determined under the retirement system, hereinafter referred to as the determination period. The cost-of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year. However, the limitation on compensation does not apply to the compensation of an individual who became a member of this retirement system before January 1, 1996."

SECTION 20. Chapter 9, Title 9 of the 1976 Code is amended by adding:

"Section 9-9-245. Compliance with USERRA.

Effective December 12, 1994, and notwithstanding any provision in this chapter to the contrary, contributions, benefits, and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Internal Revenue Code."

SECTION 21. Chapter 9, Title 9 of the 1976 Code is amended by adding:

"Section 9-9-250. Compliance with Internal Revenue Code Section 401(a)(31).

(1) the transfer shall be treated as an eligible rollover distribution;

(3) Internal Revenue Code Section 401(a)(9)(B) other than clause (iv) thereof shall apply to such individual retirement plan.

(D) An 'eligible rollover distribution' is 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:

(2) any distribution to the extent such distribution is required under Internal Revenue Code Section 401(a)(9); and

(3) any hardship distribution.

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 Internal Revenue Code Section 408(a) or (b), or in a direct trustee-to-trustee rollover to a qualified trust under Internal Revenue Code Section 401(a) or 403(a) that is part of a defined contribution or defined benefit plan, or to an annuity contract described in Internal Revenue Code Section 403(b), so long as such trust or annuity contract separately accounts for amounts so transferred, including separate accounting for the portion of such distribution that is includible in gross income and the portion of such distribution that is not includible. Effective January 1, 2008, an eligible rollover distribution also shall mean a qualified rollover contribution to a Roth IRA within the meaning of Internal Revenue Code Section 408A.