Author: Alicia Emerson
Last saved by: Barbara Rogers
Company: Senate

RBS No. 2577

STATE OF OKLAHOMA

2nd Session of the 53rd Legislature (2012)

SENATE BILL 1214	By:	Brown

AS INTRODUCED

An Act relating to compliance with Internal Revenue Service regulations; amending 11 O.S. 2011, Sections 50-105.4, 50-106, 50-114.1, 50-114.2 and 50-114.3, which relate to the Oklahoma Police Pension and Retirement System; allowing assets of the System to be invested in certain funds or trusts; authorizing the use of electronic media under certain conditions; modifying dates regarding certain distributions; specifying value of certain annuities; providing that a Roth IRA is an Eligible Retirement Plan; modifying definitions; authorizing a nonspouse designated beneficiary to directly rollover a distribution to a Roth IRA; and declaring an emergency.

BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1.     AMENDATORY     11 O.S. 2011, Section 50-105.4, is amended to read as follows:
Section 105.4.  A.  The Oklahoma Police Pension and Retirement Board shall discharge their duties with respect to the System solely in the interest of the participants and beneficiaries and:
1.  For the exclusive purpose of:
a.	providing benefits to participants and their beneficiaries, and
b.	defraying reasonable expenses of administering the System;
2.  With the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;
3.  By diversifying the investments of the System so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and
4.  In accordance with the laws, documents and instruments governing the System.
B.  The State Board may procure insurance indemnifying the members of the State Board from personal loss or accountability from liability resulting from a member’s action or inaction as a member of the State Board.
C.  The State Board may establish an investment committee.  The investment committee shall be composed of not more than five (5) members of the State Board appointed by the chairman of the State Board.  The committee shall make recommendations to the full State Board on all matters related to the choice of custodians and managers of the assets of the System, on the establishment of investment and fund management guidelines, and in planning future investment policy.  The committee shall have no authority to act on behalf of the State Board in any circumstances whatsoever.  No recommendation of the committee shall have effect as an action of the State Board nor take effect without the approval of the State Board as provided by law.
D.  The State Board shall retain qualified investment managers to provide for the investment of the monies of the System.  The investment managers shall be chosen by a solicitation of proposals on a competitive bid basis pursuant to standards set by the State Board unless the State Board deems it necessary and prudent to do otherwise to fulfill its fiduciary responsibility.  Subject to the overall investment guidelines set by the State Board, the investment managers shall have full discretion in the management of those monies of the System allocated to the investment managers.  The State Board shall manage those monies not specifically allocated to the investment managers.  The monies of the System allocated to the investment managers shall be actively managed by the investment managers, which may include selling investments and realizing losses if such action is considered advantageous to longer term return maximization.  Because of the total return objective, no distinction shall be made for management and performance evaluation purposes between realized and unrealized capital gains and losses.
E.  Funds and revenues for investment by the investment managers or the State Board shall be placed with a custodian selected by the State Board.  The custodian shall be a bank or trust company offering pension fund master trustee and master custodial services and any related custodial agreement or trust agreement is incorporated herein by reference.  The custodian shall be chosen by a solicitation of proposals on a competitive basis pursuant to standards set by the State Board.  In compliance with the investment policy guidelines of the State Board, the custodian bank or trust company shall be contractually responsible for ensuring that all monies of the System are invested in income-producing investment vehicles at all times.  If a custodian bank or trust company has not received direction from the investment managers of the System as to the investment of the monies of the System in specific investment vehicles, the custodian bank or trust company shall be contractually responsible to the State Board for investing the monies in appropriately collateralized short-term interest-bearing investment vehicles.  Any assets of the System may be invested in a collective investment fund or in a group trust that satisfies the requirements of Rev. Rul. 81-100, as further amended by Rev. Rul. 2004-67, Rev. Rul. 2008-40, and Rev. Rul. 2011-1, and as subsequently amended by future guidance.  Each such collective investment fund or group trust is adopted, with respect to any monies invested therein, as part of the System, its trust, and custodial account and each such declaration of trust or trust agreement and related adoption, participation, investment management, subtrust or other agreements, as amended from time to time, with respect to any monies invested therein, are incorporated by reference into the System, its trust agreement(s) or custodial agreement(s), upon approval by the State Board.
F.  By November 1, 1988, and prior to August 1 of each year thereafter, the State Board shall develop a written investment plan for the System.
G.  After July 1 and before November 1 of each year, the State Board shall publish widely an annual report presented in simple and easily understood language pursuant to uniform reporting standards prescribed by the Oklahoma State Pension Commission for all state retirement systems.  The report shall be submitted to the Governor, the Speaker of the House of Representatives, the President Pro Tempore of the Senate, the Oklahoma State Pension Commission and the members of the System.  The annual report shall cover the operation of the System during the past fiscal year, including income, disbursements, and the financial condition of the System at the end of the fiscal year.  The annual report shall also contain a summary of the results of the most recent actuarial valuation to include total assets, total liabilities, unfunded liability or over funded status, contributions and any other information deemed relevant by the State Board.  The annual report shall be written in such a manner as to permit a readily understandable means for analyzing the financial condition and performances of the System for the fiscal year.
H.  The State Board shall adopt a cost of living adjustment actuarial assumption in its annual actuarial valuation report.
SECTION 2.     AMENDATORY     11 O.S. 2011, Section 50-106, is amended to read as follows:
Section 50-106.  The State Board shall, in addition to other powers herein granted, have power to:
1.  Compel witnesses to attend and testify before it upon all matters connected with the operations of this article or ordinances enacted by any municipality relative to the System, and in the same manner as is or may be provided by law for the taking of testimony before notaries public; and its Chairman or any member of the State Board may administer oaths to such witnesses;
2.  Provide for the payment of all its necessary expenses, and pay for actuarial, legal and such other services as shall be required to transact the business of the System;
3.  Provide all rules and regulations necessary for its guidance in conformity with the provisions of this article including the physical requirements for eligibility for initial membership in the System.  In connection with such authority, on or after July 1, 2011, the State Board may permit, effective for applicable notices, elections and consents provided or made for a member, beneficiary, alternate payee or individual entitled to benefits under the System, the use of electronic media to provide such applicable notices and make such elections and consents as described in Section 1.401(a)-21 of the Income Tax Regulations;
4.  For the purpose of meeting disbursements for pensions and other payments, to keep on deposit in one or more banks, trust companies or savings and loan associations, to the extent that such deposit is insured, what it considers an adequate amount of cash.  No trustee or employee of the State Board shall, directly or indirectly, for himself or as an agent, in any manner use the assets of the System, except to make such current and necessary payments as are authorized by the State Board, nor shall any trustee or employee of the State Board become an endorser or surety or become in any manner an obligor for monies loaned by or borrowed from the State Board; and
5.  Effective July 1, 1999, do all acts and things necessary and proper to carry out the purpose of the System and to make the least costly amendments and changes, if any, as may be necessary to qualify the System under the applicable sections of the Internal Revenue Code of 1986, as amended.
SECTION 3.     AMENDATORY     11 O.S. 2011, Section 50-114.1, is amended to read as follows:
Section 50-114.1.  A.  For limitation years prior to July 1, 2007, the limitations of Section 415 of the Internal Revenue Code of 1986, as amended, shall be computed in accordance with the applicable provisions of the System in effect at that time and, to the extent applicable, Revenue Ruling 98-1 and Revenue Ruling 2001-51, except as provided below.  Notwithstanding any other provision contained herein to the contrary, the benefits payable to a member from the System provided by employer contributions (including contributions picked up by the employer under Section 414(h) of the Internal Revenue Code of 1986, as amended) shall be subject to the limitations of Section 415 of the Internal Revenue Code of 1986, as amended, in accordance with the provisions of this section.  The limitations of this section shall apply in limitation years beginning on or after July 1, 2007, except as otherwise provided below.
B.  Except as provided below, effective for limitation years ending after December 31, 2001, any accrued retirement benefit payable to a member as an annual benefit as described below shall not exceed One Hundred Sixty Thousand Dollars ($160,000.00), automatically adjusted under Section 415(d) of the Internal Revenue Code of 1986, as amended, for increases in the cost of living, as prescribed by the Secretary of the Treasury or the Secretary’s delegate, effective January 1 of each calendar year and applicable to the limitation year ending with or within such calendar year.  The automatic annual adjustment of the dollar limitation in this subsection under Section 415(d) of the Internal Revenue Code of 1986, as amended, shall apply to a member who has had a severance from employment.
1.  The member’s annual benefit is a benefit that is payable annually in the form of a straight life annuity.  Except as provided below, where a benefit is payable in a form other than a straight life annuity, the benefit shall be adjusted to an actuarially equivalent straight life annuity that begins at the same time as such other form of benefit and is payable on the first day of each month, before applying the limitations of this section.  For a member who has or will have distributions commencing at more than one annuity starting date, the annual benefit shall be determined as of each such annuity starting date (and shall satisfy the limitations of this section as of each such date), actuarially adjusting for past and future distributions of benefits commencing at the other annuity starting dates.  For this purpose, the determination of whether a new starting date has occurred shall be made without regard to Section 1.401(a)-20, Q&A 10(d), and with regard to Section 1.415(b)-1(b)(1)(iii)(B) and (C) of the Income Tax Regulations.
2.  No actuarial adjustment to the benefit shall be made for:
a.	survivor benefits payable to a surviving spouse under a qualified joint and survivor annuity to the extent such benefits would not be payable if the member’s benefit were paid in another form,
b.	benefits that are not directly related to retirement benefits (such as a qualified disability benefit, preretirement incidental death benefits, and postretirement medical benefits), or
c.	the inclusion in the form of benefit of an automatic benefit increase feature, provided the form of benefit is not subject to Section 417(e)(3) of the Internal Revenue Code of 1986, as amended, and would otherwise satisfy the limitations of this section, and the System provides that the amount payable under the form of benefit in any limitation year shall not exceed the limits of this section applicable at the annuity starting date, as increased in subsequent years pursuant to Section 415(d) of the Internal Revenue Code of 1986, as amended.  For this purpose, an automatic benefit increase feature is included in a form of benefit if the form of benefit provides for automatic, periodic increases to the benefits paid in that form.
3.  The determination of the annual benefit shall take into account Social Security supplements described in Section 411(a)(9) of the Internal Revenue Code of 1986, as amended, and benefits transferred from another defined benefit plan, other than transfers of distributable benefits pursuant to Section 1.411(d)-4, Q&A-3(c), of the Income Tax Regulations, but shall disregard benefits attributable to employee contributions or rollover contributions.
4.  Effective for distributions in plan years beginning after December 31, 2003, the determination of actuarial equivalence of forms of benefit other than a straight life annuity shall be made in accordance with paragraph 5 or paragraph 6 of this subsection.
5.  Benefit Forms Not Subject to Section 417(e)(3) of the Internal Revenue Code of 1986, as amended:  The straight life annuity that is actuarially equivalent to the member’s form of benefit shall be determined under this paragraph 5 if the form of the member’s benefit is either:
a.	a nondecreasing annuity (other than a straight life annuity) payable for a period of not less than the life of the member (or, in the case of a qualified preretirement survivor annuity, the life of the surviving spouse), or
b.	an annuity that decreases during the life of the member merely because of:
(1)	the death of the survivor annuitant (but only if the reduction is not below fifty percent (50%) of the benefit payable before the death of the survivor annuitant), or
(2)	the cessation or reduction of Social Security supplements or qualified disability payments (as defined in Section 411(a)(9) of the Internal Revenue Code of 1986, as amended).
c.	Limitation Years Beginning Before July 1, 2007.  For limitation years beginning before July 1, 2007, the actuarially equivalent straight life annuity is equal to the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member’s form of benefit computed using whichever of the following produces the greater annual amount:
(1)	the interest rate and the mortality table (or other tabular factor), each as set forth in subsection G of Section 50-105.4 of this title for adjusting benefits in the same form; and
(2)	a five percent (5%) interest rate assumption and the applicable mortality table described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable) for that annuity starting date.
d.	Limitation ~~Years~~ Year Beginning On ~~Or After July 1, 2007~~ January 1, 2008.  For the limitation ~~years~~ year beginning on ~~or after July 1, 2007~~ January 1, 2008, the actuarially equivalent straight life annuity is equal to the greater of:
(1)	the annual amount of the straight life annuity (if any) payable to the member under the System commencing at the same annuity starting date as the member’s form of benefit, and
(2)	the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member’s form of benefit, computed using a five percent (5%) interest rate assumption and the applicable mortality table described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable) for that annuity starting date.
e.	Limitation Years Beginning On or After July 1, 2008.  For limitation years beginning on or after July 1, 2008, the actuarially equivalent straight life annuity is equal to the greater of:
(1)	the annual amount of the straight life annuity (if any) payable to the member under the System commencing at the same annuity starting date as the member’s form of benefit, and
(2)	the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member’s form of benefit, computed using a five percent (5%) interest rate assumption and the applicable mortality table within the meaning of Section 417(e)(B) of the Internal Revenue Code of 1986, as amended, as described in Rev. Rul. 2007-67 (and subsequent guidance) for that annuity starting date.
6.  Benefit Forms Subject to Section 417(e)(3) of the Internal Revenue Code of 1986, as amended:  The straight life annuity that is actuarially equivalent to the member’s form of benefit shall be determined under this paragraph 6 if the form of the member’s benefit is other than a benefit form described in paragraph 5 of this subsection.  In this case, the actuarially equivalent straight life annuity shall be determined as follows:
a.	Annuity Starting Date ~~in Plan Years Beginning After December 31, 2007 (Plan Years beginning~~ on or after ~~July 1, 2008)~~ January 1, 2009.  If the annuity starting date of the member’s form of benefit is in the period beginning on January 1, 2009 through June 30, 2009, or in a plan year beginning after ~~December 31, 2007~~ June 30, 2009, the actuarially equivalent straight life annuity is equal to the greatest of (1), (2) ~~or~~ and (3) below:
(1)	the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member’s form of benefit, computed using the interest rate and the mortality table (or other tabular factor) each as set forth in subsection G of Section 50-105.4 of this title for adjusting benefits in the same form,
(2)	the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member’s form of benefit, computed using a five and one-half percent (5.5%) interest rate assumption and the applicable mortality table within the meaning of Section 417 (e)(3)(B) of the Internal Revenue Code of 1986, as amended, as described in Rev. Rul. 2007-67 (and subsequent guidance), and
(3)	the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member’s form of benefit, computed using:
(a)	the adjusted first, second, and third segment rates under Section 417(e)(3)(C) and (D) of the Internal Revenue Code of 1986, as amended, applied under rules similar to the rules of Section 430(h)(2)(C) of the Internal Revenue Code of 1986, as amended, for the fourth calendar month preceding the plan year in which falls the annuity  starting date for the distribution and the stability period is the successive period of one (1) plan year which contains the annuity starting date for the distribution and for which the applicable interest rate remains constant, or as otherwise provided in the applicable guidance if the first day of the first plan year beginning after December 31, 2007, does not coincide with the first day of the applicable stability period, and
(b)	the applicable mortality table within the meaning of Section 417(e)(3)(B) of the Internal Revenue Code of 1986, as amended, as described in Rev. Rul. 2007-67 (and subsequent guidance), divided by one and five one-hundredths (1.05).
b.	Annuity Starting Date in the Period Beginning on July 1, 2008 through December 31, 2008.  If the annuity starting date of the member’s form of benefit is in the period beginning on July 1, 2008 through December 31, 2008, the actuarially equivalent straight life annuity is equal to the greatest of (1), (2) and (3) below:
(1)	the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member’s form of benefit, computed using the interest rate and the mortality table (or other tabular factor) each as set forth in subsection G of Section 50-105.4 of this title for adjusting benefits in the same form,
(2)	the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member's form of benefit, computed using a five and one-half percent (5.5%) interest rate assumption and the applicable mortality table described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable), and
(3)	the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member's form of benefit, computed using:
(a)	the adjusted first, second, and third segment rates under Section 417(e)(3)(C) and (D) of the Internal Revenue Code of 1986, as amended, applied under rules similar to the rules of Section 430(h)(2)(C) of the Internal Revenue Code of 1986, as amended, for the fourth calendar month preceding the plan year in which falls the annuity starting date for the distribution and the stability period is the successive period of one (1) plan year which contains the annuity starting date for the distribution and for which the applicable interest rate remains constant, or as otherwise provided in the applicable guidance if the first day of the first plan year beginning after December 31, 2007, does not coincide with the first day of the applicable stability period, and
(b)	the applicable mortality table described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable),
divided by one and five one-hundredths (1.05).
~~b.~~
c. 	Annuity Starting Date in Plan Years Beginning in 2006 or 2007.  If the annuity starting date of the member’s form of benefit is in a Plan Year beginning in 2006 or 2007, the actuarially equivalent straight life annuity is equal to the greatest of (1), (2) ~~or~~ and (3) below:
(1)	the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member’s form of benefit, computed using the interest rate and the mortality table (or other tabular factor) each as set forth in subsection G of Section 50-105.4 of this title for adjusting benefits in the same form,
(2)	the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member’s form of benefit, computed using a five and one-half percent (5.5%) interest rate assumption and the applicable mortality table described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable), and
(3)	the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member’s form of benefit, computed using:
(a)	the rate of interest on thirty-year Treasury securities as specified by the Commissioner for the lookback month for the stability period specified below.  The lookback month applicable to the stability period is the fourth calendar month preceding the first day of the stability period, as specified below.  The stability period is the successive period of one (1) plan year which contains the annuity starting date for the distribution and for which the applicable interest rate remains constant, and
(b)	the applicable mortality table described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable),
divided by one and five one-hundredths (1.05).
~~c.~~
d.	Annuity Starting Date in Plan Years Beginning in 2004 or 2005:
(1)	If the annuity starting date of the member's form of benefit is in a plan year beginning in 2004 or 2005, the actuarially equivalent straight life annuity is equal to the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member's form of benefit, computed using whichever of the following produces the greater annual amount:
(a)	the interest rate and the mortality table (or other tabular factor) each as set forth in subsection G of Section 50-105.4 of this title for adjusting benefits in the same form, and
(b)	a five and one-half percent (5.5%) interest rate assumption and the applicable mortality table described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable).
(2)	If the annuity starting date of the member's benefit is on or after the first day of the first plan year beginning in 2004 and before December 31, 2004, the application of this subparagraph ~~b~~ shall not cause the amount payable under the member’s form of benefit to be less than the benefit calculated under the System, taking into account the limitations of this section, except that the actuarially equivalent straight life annuity is equal to the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member’s form of benefit, computed using whichever of the following produces the greatest annual amount:
(a)	the interest rate and mortality table (or other tabular factor) each as set forth in subsection G of Section 50-105.4 of this title for adjusting benefits in the same form,
(b)	(i)	the rate of interest on thirty-year Treasury securities as specified by the Commissioner for the lookback month for the stability period specified below.  The lookback month applicable to the stability period is the fourth calendar month preceding the first day of the stability period, as specified below.  The stability period is the successive period of one (1) plan year which contains the annuity starting date for the distribution and for which the applicable interest rate remains constant, and
(ii)	the applicable mortality table described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable), and
(c)	(i)	the rate of interest on thirty-year Treasury securities as specified by the Commissioner for the lookback month for the stability period specified below.  The lookback month applicable to the stability period is the fourth calendar month preceding the first day of the stability period, as specified below.  The stability period is the successive period of one (1) plan year which contains the annuity starting date for the distribution and for which the applicable interest rate remains constant (as in effect on the last day of the last plan year beginning before January 1, 2004, under provisions of the System then adopted and in effect), and
(ii)	the applicable mortality table described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable).
C.  If a member has less than ten (10) years of participation in the System and all predecessor municipal police pension and retirement systems, the dollar limitation otherwise applicable under subsection B of this section shall be multiplied by a fraction, the numerator of which is the number of the years of participation, or part thereof, in the System of the member, but never less than one (1), and the denominator of which is ten (10).
D.  Adjustment of Dollar Limitation for Benefit Commencement Before Age Sixty-two (62) or After Age Sixty-five (65):  Effective for benefits commencing in limitation years ending after December 31, 2001, the dollar limitation under subsection B of this section shall be adjusted if the annuity starting date of the member’s benefit is before age sixty-two (62) or after age sixty-five (65).  If the annuity starting date is before age sixty-two (62), the dollar limitation under subsection B of this section shall be adjusted under paragraph 1 of this subsection, as modified by paragraph 3 of this subsection, but subject to paragraph 4 of this subsection.  If the annuity starting date is after age sixty-five (65), the dollar limitation under subsection B of this section shall be adjusted under paragraph 2 of this subsection, as modified by paragraph 3 of this subsection.
1.  Adjustment of Defined Benefit Dollar Limitation for Benefit Commencement Before Age Sixty-two (62):
a.	Limitation Years Beginning Before July 1, 2007.  If the annuity starting date for the member’s benefit is prior to age sixty-two (62) and occurs in a limitation year beginning before July 1, 2007, the dollar limitation for the member’s annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the member’s annuity starting date that is the actuarial equivalent of the dollar limitation under subsection B of this section (adjusted under subsection C of this section for years of participation less than ten (10), if required) with actuarial equivalence computed using whichever of the following produces the smaller annual amount:
(1)	the interest rate and the mortality table (or other tabular factor) each as set forth in subsection G of Section 50-105.4 of this title, or
(2)	a five-percent interest rate assumption and the applicable mortality table as described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable).
b.	Limitation Years Beginning On ~~Or~~ or After July 1, 2007.
(1)	System Does Not Have Immediately Commencing Straight Life Annuity Payable at Both Age Sixty-two (62) and the Age of Benefit Commencement.
(a)	If the annuity starting date for the member’s benefit is prior to age sixty-two (62) and occurs in ~~a~~ the limitation year beginning on ~~or after July 1, 2007~~ January 1, 2008, and the System does not have an immediately commencing straight life annuity payable at both age sixty-two (62) and the age of benefit commencement, the dollar limitation for the member’s annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the member’s annuity starting date that is the actuarial equivalent of the dollar limitation under subsection B of this section (adjusted under subsection C of this section for years of participation less than ten (10), if required) with actuarial equivalence computed using a five-percent interest rate assumption and the applicable mortality table for the annuity starting date as described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable) (and expressing the member’s age based on completed calendar months as of the annuity starting date).
(b)	If the annuity starting date for the member’s benefit is prior to age sixty-two (62) and occurs in a limitation year beginning on or after January 1, 2009, and the System does not have an immediately commencing straight life annuity payable at both age sixty-two (62) and the age of benefit commencement, the dollar limitation for the member’s annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the member’s annuity starting date that is the actuarial equivalent of the dollar limitation under subsection B of this section (adjusted under subsection C of this section for years of participation less than ten (10), if required) with actuarial equivalence computed using a five-percent interest rate assumption and the applicable mortality table within the meaning of Section 417(e)(3)(B) of the Internal Revenue Code of 1986, as amended, as described in Rev. Rul. 2007-67 (and subsequent guidance) (and expressing the member’s age based on completed calendar months as of the annuity starting date).
(2)	System Has Immediately Commencing Straight Life Annuity Payable at Both Age Sixty-two (62) and the Age of Benefit Commencement.  If the annuity starting date for the member’s benefit is prior to age sixty-two (62) and occurs in a limitation year beginning on or after July 1, 2007, and the System has an immediately commencing straight life annuity payable at both age sixty-two (62) and the age of benefit commencement, the dollar limitation for the member’s annuity starting date is the lesser of the limitation determined under division (1) of subparagraph b of this paragraph and the dollar limitation under subsection B of this section (adjusted under subsection C of this section for years of participation less than ten (10), if required) multiplied by the ratio of the annual amount of the immediately commencing straight life annuity under the System at the member’s annuity starting date to the annual amount of the immediately commencing straight life annuity under the System at age sixty-two (62), both determined without applying the limitations of this section.
2.  Adjustment of Defined Benefit Dollar Limitation for Benefit Commencement After Age Sixty-five (65):
a.	Limitation Years Beginning Before July 1, 2007.  If the annuity starting date for the member’s benefit is after age sixty-five (65) and occurs in a limitation year beginning before July 1, 2007, the dollar limitation for the member’s annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the member’s annuity starting date that is the actuarial equivalent of the dollar limitation under subsection B of this section (adjusted under subsection C of this section for years of participation less than ten (10), if required) with actuarial equivalence computed using whichever of the following produces the smaller annual amount:
(1)	the interest rate and the mortality table (or other tabular factor) each as set forth in subsection G of Section 50-105.4 of this title, or
(2)	a five-percent interest rate assumption and the applicable mortality table as described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable).
b.	Limitation Years Beginning On ~~Or~~ or After July 1, 2007.
(1)	System Does Not Have Immediately Commencing Straight Life Annuity Payable at Both Age Sixty-five (65) and the Age of Benefit Commencement.
(a)	If the annuity starting date for the member’s benefit is after age sixty-five (65) and occurs in ~~a~~ the limitation year beginning on ~~or after July 1, 2007~~ January 1, 2008, and the System does not have an immediately commencing straight life annuity payable at both age sixty-five (65) and the age of benefit commencement, the dollar limitation at the member’s annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the member’s annuity starting date that is the actuarial equivalent of the dollar limitation under subsection B of this section (adjusted under subsection C of this section for years of participation less than ten (10), if required) with actuarial equivalence computed using a five-percent interest rate assumption and the applicable mortality table for the annuity starting date as described in Rev. Rul. 2001-62 (or its successor for these purposes, if applicable) (and expressing the member’s age based on completed calendar months as of the annuity starting date).
(b)	If the annuity starting date for the member’s benefit is after age sixty-five (65) and occurs in a limitation year beginning on or after January 1, 2009, and the System does not have an immediately commencing straight life annuity payable at both age sixty-five (65) and the age of benefit commencement, the dollar limitation at the member’s annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the member’s annuity starting date that is the actuarial equivalent of the dollar limitation under subsection B of this section (adjusted under subsection C of this section for years of participation less than ten (10), if required) with actuarial equivalence computed using a five-percent interest rate assumption and the applicable mortality table within the meaning of Section 417(e)(3)(B) of the Internal Revenue Code of 1986, as amended, as described in Rev. Rul. 2007-67 (and subsequent guidance) (and expressing the member’s age based on completed calendar months as of the annuity starting date).
(2)	System Has Immediately Commencing Straight Life Annuity Payable at Both Age Sixty-five (65) and Age of Commencement.  If the annuity starting date for the member’s benefit is after age sixty-five (65) and occurs in a limitation year beginning on or after July 1, 2007, and the System has an immediately commencing straight life annuity payable at both age sixty-five (65) and the age of benefit commencement, the dollar limitation at the member’s annuity starting date is the lesser of the limitation determined under division (1) of subparagraph b of this paragraph and the dollar limitation under subsection B of this section (adjusted under subsection C of this section for years of participation less than ten (10), if required) multiplied by the ratio of the annual amount of the adjusted immediately commencing straight life annuity under the System at the member’s annuity starting date to the annual amount of the adjusted immediately commencing straight life annuity under the System at age sixty-five (65), both determined without applying the limitations of this section.  For this purpose, the adjusted immediately commencing straight life annuity under the System at the member’s annuity starting date is the annual amount of such annuity payable to the member, computed disregarding the member’s accruals after age sixty-five (65) but including actuarial adjustments even if those actuarial adjustments are used to offset accruals; and the adjusted immediately commencing straight life annuity under the System at age sixty-five (65) is the annual amount of such annuity that would be payable under the System to a hypothetical member who is age sixty-five (65) and has the same accrued benefit as the member.
3.  Notwithstanding the other requirements of this subsection, no adjustment shall be made to the dollar limitation under subsection B of this section to reflect the probability of a member’s death between the annuity starting date and age sixty-two (62), or between age sixty-five (65) and the annuity starting date, as applicable, if benefits are not forfeited upon the death of the member prior to the annuity starting date.  To the extent benefits are forfeited upon death before the annuity starting date, such an adjustment shall be made.  For this purpose, no forfeiture shall be treated as occurring upon the member’s death if the System does not charge members for providing a qualified preretirement survivor annuity, as defined in Section 417(c) of the Internal Revenue Code of 1986, as amended, upon the member’s death.
4.  Notwithstanding any other provision to the contrary, for limitation years beginning on or after January 1, 1997, if payment begins before the member reaches age sixty-two (62), the reductions in the limitations in this subsection shall not apply to a member who is a “qualified participant” as defined in Section 415(b)(2)(H) of the Internal Revenue Code of 1986, as amended.
E.  Minimum Benefit Permitted:  Notwithstanding anything else in this section to the contrary, the benefit otherwise accrued or payable to a member under this System shall be deemed not to exceed the maximum permissible benefit if:
1.  The retirement benefits payable for a limitation year under any form of benefit with respect to such member under this System and under all other defined benefit plans (without regard to whether a plan has been terminated) ever maintained by a participating municipality do not exceed Ten Thousand Dollars ($10,000.00) multiplied by a fraction:
a.	the numerator of which is the member’s number of credited years (or part thereof, but not less than one (1) year) of service (not to exceed ten (10) years) with the participating municipality, and
b.	the denominator of which is ten (10); and
2.  The participating municipality (or a predecessor employer) has not at any time maintained a defined contribution plan in which the member participated (for this purpose, mandatory employee contributions under a defined benefit plan, individual medical accounts under Section 401(h) of the Internal Revenue Code of 1986, as amended, and accounts for postretirement medical benefits established under Section 419A(d)(1) of the Internal Revenue Code of 1986, as amended, are not considered a separate defined contribution plan).
F.  In no event shall the maximum annual accrued retirement benefit of a member allowable under this section be less than the annual amount of such accrued retirement benefit, including early pension and qualified joint and survivor annuity amounts, duly accrued by the member as of the last day of the limitation year beginning in 1982, or as of the last day of the limitation year beginning in 1986, whichever is greater, disregarding any plan changes or cost-of-living adjustments occurring after July 1, 1982, as to the 1982 accrued amount, and May 5, 1986, as to the 1986 accrued amount.
G.  Effective for years beginning after December 31, 1997, if a member purchases service pursuant to Section 50-111.2 and Section 50-111.4 of this title, which qualifies as “permissive service credit” pursuant to Section 415(n) of the Internal Revenue Code of 1986, as amended, the limitations of Section 415 of the Internal Revenue Code of 1986, as amended, may be met by either:
1.  Treating the accrued benefit derived from such contributions as an annual benefit under subsection B of this section, or
2.  Treating all such contributions as annual additions for purposes of Section 415(c) of the Internal Revenue Code of 1986, as amended.
H.  Effective for years beginning after December 31, 1997, if a member repays to the System any amounts received because of such member’s prior termination pursuant to subsection C of Section 50-111.1 of this title, such repayment shall not be taken into account for purposes of Section 415 of the Internal Revenue Code of 1986, as amended, pursuant to Section 415(k)(3) of the Internal Revenue Code of 1986, as amended.
I.  For limitation years beginning on or after January 1, 1995, subsection C of this section, paragraph 1 of subsection D of this section, and the proration provided under subparagraphs a and b of paragraph 1 of subsection E of this section shall not apply to a benefit paid under the System as the result of the member becoming disabled by reason of personal injuries or sickness, or amounts received by the beneficiaries, survivors or estate of the member as the result of the death of the member.
J.  For distributions made in limitation years beginning on or after January 1, 2000, the combined limit of repealed Section 415(e) of the Internal Revenue Code of 1986, as amended, shall not apply.
K.  The State Board is hereby authorized to revoke the special election previously made on June 19, 1991, under Section 415(b)(10) of the Internal Revenue Code of 1986, as amended.
SECTION 4.     AMENDATORY     11 O.S. 2011, Section 50-114.2, is amended to read as follows:
Section 50-114.2.  A.  This section applies to distributions made on or after January 1, 2002.  Notwithstanding any provision of the System to the contrary that would otherwise limit a Distributee’s election hereunder, a Distributee, including a nonspouse designated beneficiary, to the extent permitted under paragraph 3 of subsection B of this section, may elect, at the time and in the manner prescribed by the State Board, to have any portion of an Eligible Rollover Distribution paid directly to~~:~~
~~1.  An Eligible Retirement Plan; or~~
~~2.  Effective for distributions after December 31, 2007, a Roth IRA described in Section 408A of the Internal Revenue Code of 1986, as amended, subject to any limitations described in Section 408A(c)of the Internal Revenue Code of 1986, as amended;~~
~~specified by the Distributee in a Direct Rollover~~ an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
B.  For purposes of this section, the following definitions shall apply:
1.  “Eligible Rollover Distribution” means any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include:  any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or life expectancies) of the Distributee and the Distributee’s designated beneficiary, or for a specified period of ten (10) years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Internal Revenue Code of 1986, as amended; and the portion of any distribution that is not includable in gross income.  ~~Effective January 1, 2002, a~~ A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax member contributions which are not includable in gross income.  However, such portion may be transferred only:
a.	from January 1, 2002, through December 31, 2006:
(1)	to an individual retirement account or annuity described in Section 408(a) or (b) of the Internal Revenue Code of 1986, as amended, or
(2)	in a direct trustee-to-trustee transfer, to a qualified trust which is part of a defined contribution plan that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includable in gross income and the portion of such distribution which is not so includable, and
b.	on or after January 1, 2007:
(1)	to an individual retirement account or annuity described in Section 408(a) or (b) of the Internal Revenue Code of 1986, as amended, or
(2)	in a direct trustee-to-trustee transfer, to a qualified trust or an annuity contract described in Section 403(b) of the Internal Revenue Code of 1986, as amended, and such trust or contract provides for separate accounting for amounts so transferred (and earnings thereon), including separately accounting for the portion of such distribution which is includable in gross income and the portion of such distribution which is not so includable.
Effective for distributions after December 31, 2007, such after-tax portion may also be directly transferred to a Roth ~~IRA~~ individual retirement account or annuity, described in Section 408A of the Internal Revenue Code of 1986, as amended (Roth IRA), subject to any limitations described in Section 408A(c) of the Internal Revenue Code of 1986, as amended~~, that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible~~.
Notwithstanding the foregoing, effective January 1, 2009, to the extent applicable, if all or a portion of a distribution from the Oklahoma Police Deferred Option Plan during 2009 is treated as an Eligible Rollover Distribution pursuant to Section 402(c)(4) of the Internal Revenue Code of 1986, as amended, but would not be so treated if the minimum distribution requirements under Section 401(a)(9) of the Internal Revenue Code of 1986, as amended, had applied during 2009, such distribution shall not be treated as an Eligible Rollover Distribution for purposes of Section 401(a)(31), Section 3405(c) or Section 402(f) of the Internal Revenue Code of 1986, as amended;
2.  “Eligible Retirement Plan” means an individual retirement account described in Section 408(a) of the Internal Revenue Code of 1986, as amended, an individual retirement annuity described in Section 408(b) of the Internal Revenue Code of 1986, as amended, an annuity plan described in Section 403(a) of the Internal Revenue Code of 1986, as amended, or a qualified trust described in Section 401(a) of the Internal Revenue Code of 1986, as amended, that accepts the Distributee’s Eligible Rollover Distribution.  Effective January 1, 2002, an Eligible Retirement Plan shall also mean an annuity contract described in Section 403(b) of the Internal Revenue Code of 1986, as amended, and an eligible plan under Section 457(b) of the Internal Revenue Code of 1986, as amended, which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from the System.  Effective for distributions after December 31, 2007, an Eligible Retirement Plan includes a Roth IRA, subject to any limitations under Section 408A(c) of the Internal Revenue Code of 1986, as amended;
3.  “Distributee” means an employee or former employee.  In addition, ~~effective June 7, 1993,~~ 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 order, as defined in subsection B of Section 50-124 of this title, are Distributees with regard to the interest of the spouse or the former spouse.  Effective for distributions after December 31, 2006, a Distributee also includes the member’s nonspouse designated beneficiary (and certain trusts described in Section 402(c)(11)(B) of the Internal Revenue Code of 1986, as amended), pursuant to Section 401(a)(9)(E) of the Internal Revenue Code of 1986, as amended, who may elect any portion of a payment to be made in a Direct Rollover only to ~~an~~ a traditional individual retirement account or annuity (other than an endowment contract) described in Section 408(a) or (b) of the Internal Revenue Code of 1986, as amended, (IRA), or, effective for distributions after December 31, 2007, to a Roth IRA, that is established on behalf of such nonspouse designated beneficiary for the purpose of receiving the distribution and that will be treated as an inherited IRA pursuant to the provisions of Section 402(c)(11) of the Internal Revenue Code of 1986, as amended.  Also, in this case, the determination of any required minimum distribution under Section 401(a)(9) of the Internal Revenue Code of 1986, as amended, that is ineligible for rollover shall be made in accordance with Notice 2007-7, Q&A 17 and 18, 2007-5 I.R.B. 395.  The required minimum distribution rules of Section 401(a)(9)(B) (other than clause iv thereof) of the Internal Revenue Code of 1986, as amended, apply to the transferee IRA~~.  Furthermore, to the extent permitted or required under the Worker, Retiree, and Employer Recovery Act of 2008, Notice 2008-30, 2008-12 I.R.B. 638 and/or any other regulatory guidance, effective for plan years beginning after December 31, 2009, a nonspouse designated beneficiary (as described in and in accordance with Section 402(c)(11) of the Internal Revenue Code of 1986, as amended), may directly roll over a distribution to a Roth IRA~~; and
4.  “Direct Rollover” means a payment by the System to the Eligible Retirement Plan specified by the Distributee ~~or, effective for distributions on or after January 1, 2008, to a Roth IRA under Section 408A of the Internal Revenue Code of 1986, as amended, as specified by the Distributee (assuming the Distributee otherwise meets the Roth IRA requirements)~~.
C.  At least thirty (30) days before and, effective for years beginning after December 31, 2006, not more than one hundred eighty (180) days before the date of distribution, the Distributee (other than a nonspouse designated beneficiary prior to July 1, 2010) must be provided with a notice of rights which satisfies Section 402(f) of the Internal Revenue Code of 1986, as amended, as to rollover options and tax effects.  Such distribution may commence less than thirty (30) days after the notice is given, provided that:
1.  The State Board clearly informs the Distributee that the Distributee has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect a distribution; and
2.  The Distributee, after receiving the notice, affirmatively elects a distribution.
D.  For distributions made after December 31, 2006, but prior to July 1, 2010, a distribution with respect to a nonspouse designated beneficiary shall be made in accordance with Notice 2007-7, Q&A 15, 2007-5 Internal Revenue Bulletin 395.  Effective for plan years beginning after December 31, 2009, a distribution with respect to a nonspouse designated beneficiary shall be subject to Sections 401(a)(31), 402(f), and 3405(c) of the Internal Revenue Code of 1986, as amended.
SECTION 5.     AMENDATORY     11 O.S. 2011, Section 50-114.3, is amended to read as follows:
Section 50-114.3.  A.  An individual who has been designated, pursuant to Section 401(a)(9)(E) of the Internal Revenue Code of 1986, as amended, as the beneficiary of a deceased member and who is not the surviving spouse of the member, may elect, in accordance with Section 402(c)(11) of the Internal Revenue Code of 1986, as amended, to have a direct trustee-to-trustee transfer of any portion of such beneficiary’s distribution from the System after December 31, 2006, made only to ~~an~~ a traditional individual retirement account or individual retirement annuity (other than an endowment contract) described in Section 408(a) or (b) of the Internal Revenue Code of 1986, as amended (IRA), or, effective for distributions after December 31, 2007, to a Roth individual retirement account or annuity described in Section 408A of the Internal Revenue Code of 1986, as amended (Roth IRA), that is established on behalf of such designated individual for the purpose of receiving the distribution.  If such transfer is made, then:
1.  For distributions made after December 31, 2006, but prior to July 1, 2010, the transfer is treated as an eligible rollover distribution for purposes of Section 402(c)(11) of the Internal Revenue Code of 1986, as amended.  For plan years beginning after December 31, 2009, the transfer is treated as an eligible rollover distribution;
2.  The transferee IRA is treated as an inherited individual retirement account or an inherited individual retirement annuity (within the meaning of Section 408(d)(3)(C) of the Internal Revenue Code of 1986, as amended), and must be titled in the name of the deceased member, for the benefit of the beneficiary; and
3.  The required minimum distribution rules of Section 401(a)(9)(B) (other than clause iv thereof) of the Internal Revenue Code of 1986, as amended, apply to the transferee IRA~~; and~~
~~4.  Notwithstanding the foregoing provisions of this section, to the extent permitted or required under the Worker, Retiree, and Employer Recovery Act of 2008, Notice 2008-30,2008-12 I.R.B. 638 and/or any other regulatory guidance, effective for plan years beginning after December 31, 2009, a nonspouse designated beneficiary (as described in and in accordance with Section 402(c)(11) of the Internal Revenue Code of 1986, as amended), may elect to have a direct trustee-to-trustee transfer of any portion of such beneficiary’s distribution from the System to a Roth IRA~~.
B.  A trust maintained for the benefit of one or more designated beneficiaries shall be treated in the same manner as a designated beneficiary.
C.  The State Board shall promulgate such rules as are necessary to implement the provisions of this section.
SECTION 6.  It being immediately necessary for the preservation of the public peace, health and safety, an emergency is hereby declared to exist, by reason whereof this act shall take effect and be in full force from and after its passage and approval.

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