ARTICLE 40

Relating To Retirement System – Administration

SECTION 1. Section 36-8-20 of the General Laws in Chapter 36-8 entitled "Retirement System - Administration" is hereby amended to read as follows:

36-8-20. Internal Revenue Code qualification. -- (a) Intent. - It is intended that the retirement system satisfy the requirements of section 401(a) of the Internal Revenue Code of 1986 as amended from time to time, 26 U.S.C. section 401 (hereinafter referred to as the "code"), in form and operation, to the extent that those requirements apply to a governmental plan described in section 414(d) of the code, 26 U.S.C. section 414. To this end, the following provisions shall be applicable, administered, and interpreted in a manner consistent with maintaining the tax qualification of the retirement system, and shall supersede any conflicting provisions of chapters 8 -- 10 of this title, of chapter 16 of title 16, or of chapter 21 of title 45.

(b) Exclusive benefit. - All funds of the retirement systems shall be held in one or more trusts, in one or more custodial accounts treated as trusts in accordance with section 401(f) of the code, or in a combination thereof. Under any trust or custodial account, it shall be impossible at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries, for any part of the corpus or income to be used for, or diverted to, purposes other than the payment of retirement allowances and other pension benefits to employees and their beneficiaries. However, this requirement shall not prohibit: (1) the return of a contribution within six (6) months after the executive director determines that the contribution was made by a mistake of fact; or (2) the payment of expenses of the retirement system in accordance with applicable law.

(c) Vesting on plan termination. - In the event of the termination (within the meaning of the code) of the retirement system, the accrued benefits of eligible employees shall become fully and immediately vested but only to the extent those benefits are already funded.

(d) Forfeitures. - Credits forfeited by an employee pursuant to section 36-10-8, section 16-16-31, or section 45-21-28 shall not be applied to increase the benefits of any other employee.

(e) Required distributions. - Distributions shall begin to be made not later than the employee's required beginning date as defined under section 401(a)(9) of the code and shall be made in accordance with all other requirements of that code section.

(f) Limitation on benefits. - Benefits shall not be payable to the extent that they exceed the limitations imposed by section 415 of the code, 26 U.S.C. section 415. , as adjusted from time to time pursuant to section 415(d) of the code. In no event shall the member receive a retirement benefit in any year that exceeds the limitations set forth in section 415(b).

(g) Limitation on compensation. - Benefits and contributions shall not be computed with reference to any compensation that exceeds the maximum dollar amount permitted by section 401(a)(17) of the code as adjusted for increases in the cost-of-living. This provision shall take effect July 1, 1994, and shall apply only with respect to an employee who first becomes a member of the retirement system on or after that date.

(h) Actuarial determination. - Whenever the amount of any employee's benefit is to be determined on the basis of actuarial assumptions done by a professional actuary, those assumptions shall be specified by resolution of the retirement board.

(i) Direct rollovers. - Any individual withdrawing any distribution from the retirement system which constitutes an "eligible rollover distribution" within the meaning of section 402(c) of the code, 26 U.S.C. section 402, may elect, in the time and manner prescribed by the retirement board and after receipt of proper notice, to have any portion of the distribution paid directly to another plan that is qualified under section 401(a) or 403(a), 26 U.S.C. section 403(a), of the code, or to an individual retirement account or annuity described in section 408(a) or (b) of the code, 26 U.S.C. section 408, in a direct rollover.

SECTION 2. This article shall take effect upon passage.