SB449,3,5 240.015 Compliance with federal tax laws. (1) The Wisconsin retirement
3system is established as a governmental plan and as a qualified plan for federal
4income tax purposes under the internal revenue code and shall be so maintained and
5administered.

SB449,3,9 6(2) No benefit plan authorized under this chapter may be administered in a
7manner which violates an internal revenue code provision that authorizes or
8regulates that benefit plan or which would cause an otherwise tax exempt benefit to
9become taxable under the internal revenue code.

SB449,3,1611 40.02 (8) (a) 1. The person, or a trust in which the person has a beneficial
12interest, so designated by a participant or insured employe or annuitant in the last
13written designation of beneficiary on file with, and in the form approved by, the
14department at the time of death, except as provided in s. 40.23 (4) (c). A written
15designation of beneficiary for a specified benefit plan applies only for determining
16beneficiaries under that specified benefit plan.

SB449,3,2118 40.02 (14) "Creditable current service" means the creditable service granted
19for service performed for a participating employer and for which a participating
20employe receives earnings from a participating employer after the effective date of
21participation for that employer.

SB449,4,142 40.02 (22) (a) Except as provided in pars. (b) to (f) and s. 40.63 (1) (c), means
3the gross amount paid to an employe by a participating employer as salary or wages,
4including amounts provided through deferred compensation or tax shelter
5agreements, for personal services rendered to or for an employer, or which would
6have been available for payment to the employe except for the employe's election that
7part or all of the amount be used for other purposes and also includes the money
8value, as determined by the employer, of any board, lodging, fuel, laundry and other
9allowances provided for the employe in lieu of money. For purposes of this
10paragraph, the gross amount shall be determined prior to deductions for taxes,
11insurance premiums, retirement contributions or deposits, charitable contributions
12or similar amounts and shall be considered received as of the date when the earnings
13would normally be payable by the employer. For reporting and computation
14purposes, fractions of a dollar shall be disregarded in determining annual earnings.

SB449,5,316 40.02 (22) (b) 9. Payments for damages, attorney fees, interest or penalties paid
17under court judgment or by compromise settlement to satisfy a grievance or wage
18claim even though the amount of damages or penalties might be based on previous
19salary levels. However, where the court order or compromise settlement directs that
20salary be paid for a specified period of time, the payment shall be considered covered
21earnings applicable to the period specified in the order or settlement, and if the order
22or settlement provides that the salary be reduced by amounts earned from other
23sources, then the covered earnings shall be determined prior to the reduction the
24department may by rule provide that a payment of additional wages to a
25continuously participating employe, or the payment of salary to a participant for any

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1period of improper termination of participating employment, is earnings, if the
2payment is treated by the employer and employe as taxable income and is consistent
3with previous payment for hours of service rendered by the employe.

SB449,5,146 40.02 (22) (e) Except for OASDHI purposes, at the employer's discretion,
7means compensation deemed to have been paid for services deemed to have been
8rendered during periods of leaves of absence without pay, while serving in a position
9covered under, and meeting the requirements of, 38 USC 4301, et seq., at the
10employe's rate of pay prior to the leave beginning such service, provided
11contributions and premiums on the deemed earnings are paid as required under s.
1240.05. Any action taken under this paragraph that applies to state employes shall
13be taken pursuant to a collective bargaining agreement under subch. V of ch. 111 or
14s. 230.12 or 233.10.

SB449,5,2016 40.02 (26g) "Employe-funded reimbursement account plan" means a plan in
17accordance with section 125 of the internal revenue code, as defined in s. 71.01, under
18which an employe may direct an employer to place part of the employe's gross
19compensation in an account to pay for certain future expenses of the employe under
20section 125 of the internal revenue code.

SB449,5,2522 40.02 (39m) "Internal revenue code" means the internal revenue code, as
23defined for the current taxable year under s. 71.01 (6), and applicable regulations
24adopted under the internal revenue code, including proposed and temporary
25regulations, except as otherwise provided by the department by rule.

SB449,6,162 40.02 (40) "Leave of absence" means any period during which an employe has
3ceased to render services for a participating employer and receive earnings from a
4participating employer and there has been no formal termination of the
5employer-employe relationship. For purposes of the fund every leave of absence,
6except a military leave or union service leave, shall terminate 3 years after it begins
7or, if earlier, upon the date specified by the employer in a notification to the
8department that the employer-employe relationship has terminated. A leave of
9absence is not deemed ended or interrupted by reason of resumption of active duty
10until the employe has resumed active performance of duty for 30 consecutive
11calendar days for at least 50% of what is considered that employe's normal work time
12with that employer. For the purpose of group health insurance coverage, every leave
13of absence due to employe layoff which has not been terminated before 3 years have
14elapsed shall continue for affected insured employes until an additional 2 years
15elapse or until sick leave credits used to pay health insurance premiums are
16exhausted, whichever occurs first.

SB449,6,2018 40.02 (48r) "Required beginning date" means the later of April 1 of the calendar
19year following the year in which a participant attains the age of 70.5 years or April
201 of the calendar year in which a participating employe retires.

SB449,6,2522 40.03 (2) (t) Shall ensure that the Wisconsin retirement system complies with
23the internal revenue code as a qualified plan for income tax purposes and shall
24ensure that each benefit plan is administered in a manner consistent with all
25internal revenue code provisions that authorize and regulate the benefit plan.

SB449,7,62 40.05 (1) (a) 5. Additional contributions may be made by any participant by
3deduction from earnings or otherwise or may be provided on behalf of any participant
4in any calendar year in which the participant has earnings, subject to any limitations
5imposed on contributions by the U.S. internal revenue code, applicable regulations
6adopted under the internal revenue code and rules of the department.

SB449,7,158 40.05 (1) (a) 6. Under the rules promulgated under s. 40.03 (2) (r), additional
9contributions, other than the first $5,000 of contributions, or a beneficiary's prorated
10share thereof, that are attributable to a death benefit paid under s. 40.73, may be
11made to the fixed annuity division by any participant by rollover contribution of a
12payment or distribution from a pension or annuity qualified under section 401 of the
13internal revenue code, as defined in s. 71.01 (6), subject to any limitations imposed
14on contributions by the internal revenue code, applicable regulations adopted under
15the internal revenue code and rules of the department.

SB449,7,2217 40.05 (1) (a) 7. Subject to any applicable limitations under the internal revenue
18code, a participating employe may elect to use part or all of his or her accumulated
19after-tax additional contributions, including interest, made under subd. 5., other
20than contributions treated by the department as contributions to a tax sheltered
21annuity under section 403 (b) of the internal revenue code, to purchase creditable
22service under this chapter.

SB449,8,3

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140.05 (2r) Annual contributions limitations; disqualification procedure. (a)
2Contributions made under this section are subject to the limitations under s. 40.32
3and the internal revenue code.

SB449,8,104 (b) If a participant in the Wisconsin retirement system also participates in a
5different retirement plan offered by an employer that is subject to section 401 of the
6internal revenue code and the internal revenue service seeks to disqualify one or
7more of the plans because the aggregate contributions to the plans exceed the
8contribution limits under section 415 of the internal revenue code, the internal
9revenue service, if it permits state law to determine the order of disqualification of
10such retirement plans, shall disqualify the retirement plans in the following order:

SB449,8,1111 1. Retirement plans offered and administered by the employer.

SB449,8,1312 2. Retirement plans offered by the employer, but administered by the
13department.

SB449,8,1414 3. The Wisconsin retirement system.

SB449,8,2116 40.08 (1m) (e) 2. Except as provided in subd. subds. 3. and 4., the control and
17ownership rights of the alternate payee over his or her share of the account shall be
18the same as if the alternate payee were a participant who had ceased to be a
19participating employe but had not applied for a benefit under s. 40.23 or 40.25 on the
20decree date or the date that the participant terminated covered employment,
21whichever is earlier.

SB449,8,2523 40.08 (1m) (e) 4. An alternate payee, who elects an annuity option, may only
24elect among the options under s. 40.24 that provide payments that are calculated
25only on the basis of the age of the alternate payee.

SB449,9,252 40.08 (1m) (f) 2. If the participant is an annuitant on the decree date, the
3annuity shall be recomputed using the total value of the participant's account
4determined under par. (b) reduced by the total of the alternate payee share
5transferred under par. (e) 1., in accordance with the actuarial tables in effect and
6using the participant's age on the decree date. The decree date shall be the effective
7date of recomputation. If the optional annuity form before division of the
8participant's account under par. (b) was not a joint and survivor annuity with the
9alternate payee as the named survivor, the same annuity option with no change in
10the remaining guarantee period, if any, shall be continued upon recomputation to
11both the participant and the alternate payee. The present value of the alternate
12payee's share of the annuity after division shall be paid to the alternate payee as a
13straight life annuity based on the age of the alternate payee on the decree date. The
14alternate payee's annuity shall have the same remaining guarantee period, if any,
15as the participant's annuity. If the optional annuity form before division of the
16participant's account under par. (b) was a joint and survivor annuity with the
17alternate payee as the named survivor, the present value of the annuity after division
18shall be paid to both the participant and the alternate payee as a straight life annuity
19based upon their respective ages on the decree date. If the participant's account is
20reestablished under s. 40.26 (2) after the decree date, the memorandum account
21created under s. 40.26 (2) (b) shall be adjusted by the total of the alternate payee
22share computed under this subdivision. If the participant's account is reestablished
23under s. 40.63 (10) after the decree date, the amounts and creditable service
24reestablished shall be reduced by an amount equal to the percentage of the alternate
25payee share computed under this subdivision.

SB449,10,42 40.08 (6) Refunds. (a) Notwithstanding s. 20.913, but subject to par. (b), the
3department may refund any money paid in error to the fund by or on behalf of a
4person who is not a participant.

SB449,10,65 (b) The department may not refund any money paid into the fund by an
6employer, but shall by rule credit the money to the employer.

SB449,10,117 (c) Except as provided in par. (d), money paid into the fund by an employer on
8behalf of a participant which exceeds the contribution limits under s. 40.32 may not
9be refunded to the employer, but the department shall by rule credit the money to the
10employer and the employer shall pay the participant the amount of the credit as
11additional wages or salary.

SB449,10,1412 (d) Money paid into the fund by a participant which exceeds the contribution
13limits under s. 40.32 may be refunded directly to the participant if the department
14determines that the money was paid on an after-tax basis.

SB449,10,1515 (e) No interest may be credited to any money refunded under this subsection.

SB449,10,1817 40.08 (8) (a) Benefits provided under this chapter shall be considered
18abandoned as follows:

SB449,11,319 1. Any potential primary beneficiary under s. 40.02 (8), other than an estate,
20who has not applied for any benefit payable under this chapter as a result of the
21death of the participant and whom the department cannot locate by reasonable
22efforts, as determined by the department by rule, within one year after the death of
23the participant shall be presumed to have predeceased the participant and all other
24potential beneficiaries. Thereafter, if the department is unable to locate any
25resulting subsequent beneficiary within 6 months, all beneficiaries under s. 40.02 (8)

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1(a) 1. and 2. shall be presumed to have predeceased the participant and the
2department shall pay all benefits payable under this chapter as a result of the death
3of the participant to the participant's estate in a lump sum.

SB449,11,124 2. If an estate that is determined by the department to be a beneficiary is closed
5prior to the payment of benefits payable under this chapter as a result of the death
6of the participant and the estate is not reopened within 6 months after the
7department notifies the estate that a benefit is payable, the benefit shall be
8considered irrevocably abandoned and shall be credited to the employer
9accumulation reserve, unless the estate was the designated beneficiary under s.
1040.02 (8) (a) 1. If the estate was the designated beneficiary under s. 40.02 (8) (a) 1.,
11the department shall pay the benefit to a beneficiary as determined under s. 40.02
12(8) (a) 2.

SB449,11,2213 3. A participant, other than a participating employe or annuitant, whom the
14department cannot locate by reasonable efforts, with such efforts beginning by the
15end of the month in which the participant attains, or would have attained, the age
16of 65, shall be considered to have abandoned all benefits under the Wisconsin
17retirement system on the date on which the participant attains, or would have
18attained, the age of 70. The department shall close the participant's account and
19shall transfer the moneys in the account to the employer accumulation reserve. The
20department shall restore the participant's account and shall debit the employer
21accumulation reserve accordingly if the participant subsequently applies for
22retirement benefits under this chapter before attaining the age of 80.

SB449,12,823 4. The former spouse of a participant who is an alternate payee and whom the
24department cannot locate by reasonable efforts, with such efforts beginning by the
25end of the month in which the participant attains, or would have attained, the age

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1of 65, shall be considered to have abandoned all benefits under the Wisconsin
2retirement system on the date on which the participant attains, or would have
3attained, the age of 70. The department shall close the alternate payee's account and
4shall transfer the moneys in the account to the employer accumulation reserve. The
5department shall restore the alternate payee's account and shall debit the employer
6accumulation reserve accordingly if the alternate payee subsequently applies for
7retirement benefits under this chapter before the participant attains or would have
8attained the age of 80.

SB449,12,119 5. All presumptions under this paragraph are conclusive upon payment of the
10benefit payable under this chapter as a result of the death of the participant to any
11qualifying person, estate or entity other than the employer accumulation reserve.

SB449,12,1713 40.08 (8) (b) All moneys or credits in an account for a person presumed to have
14died intestate, without heirs or beneficiary, or to be abandoned by the person under
15par. (a) shall be applied, at the end of the calendar year in which notice is published
16under par. (c), to the appropriate employer accounts employer accumulation reserve
17to reduce future funding requirements.

SB449,13,319 40.08 (8) (c) The department shall publish a class 1 notice, under ch. 985, in
20the official state paper stating the names of persons presumed to have died intestate,
21without heirs or beneficiary, or whose accounts are presumed to be abandoned under
22par. (a), and the fact that a benefit will be paid to the respective persons listed or their
23respective heirs or legatees on proof of ownership, if applied for within 10 years after
24the date of publication of the notice the time limits under par. (a) and if the
25participant, alternate payee or other person offers proof satisfactory to the

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1department that the participant, alternate payee or other person is entitled to the
2benefit. Such proof shall include, but is not limited to, evidence that the participant
3died and that the person is the beneficiary under s. 40.02 (8).

SB449,13,155 40.08 (14) (title) Lump sum rollovers Rollovers to other retirement plans.
6If a participant who is entitled to receive a lump sum payment or a monthly annuity
7certain under s. 40.24 (1) (f) for which the participant has specified a term of less than
8120 months from the Wisconsin retirement system and who has an account
9established under any other retirement plan located in the United States so directs
10in writing, on a form prescribed by the department, the department shall pay the
11lump sum payment or the monthly annuity directly to the participant's account
12under that other retirement plan for credit under that other retirement plan. The
13department shall cease payment of the monthly annuity payments to the annuitant's
14account under the other retirement plan within 30 days of the written request of the
15annuitant or written notice of the annuitant's death.

SB449,13,2117 40.23 (1) (a) 1. The participant is separated, regardless of cause, and continues
18to be separated either until the annuity effective date, or until the date 30 days after
19the application is received by the department, or the date 30 days after separation,
20whichever is later, from all employment meeting the qualifications for inclusion
21specified in s. 40.22 for any participating employer.

SB449,14,823 40.23 (1) (b) All retirement annuities shall be effective on the day following, or
24on the first day of a month following, the date of separation from the last
25participating employer by which the participant was employed, as specified by the

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1participant in the written application for the annuity. However, the date shall not
2be more than 90 days prior to the date of receipt of the application by the department.
3The participant may specify that additional contribution accumulations shall not be
4applied to provide an annuity until a subsequent application is filed for an annuity
5to be paid from the additional contribution accumulations. The subsequent
6application shall be made as specified under sub. (4) or the department shall
7automatically distribute the accumulated additional contribution accumulations as
8a lump sum.

SB449,14,1510 40.23 (1) (c) No application specifying an annuity effective date later than 60
11days after the date of its receipt by the department shall be accepted , unless the
12participant files the application on or after January 1 of the calendar year in which
13the participant attains the age of 69.5 years specifying an annuity effective date that
14begins before April 1 of the year following the calendar year in which the participant
15attains the age of 70.5 years.

SB449,14,2217 40.23 (1) (d) Notwithstanding par. (c), an application for an annuity to be
18effective on the day following termination of employment may be filed up to 90 days
19prior to the employe's anticipated termination date. The anticipated termination
20date shall be stated in the application and the department shall not make an annuity
21payment until the employe has terminated. The department shall reject any
22application that is filed more than 90 days prior to the employe's termination date.

SB449,15,1224 40.23 (2m) (b) Except as provided in s. 40.26, subject to the limitations under
25section 415 of the internal revenue code, as defined for the current taxable year under

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1s. 71.01 (6), the initial amount of the normal form annuity shall be an amount equal
2to 65%, or 85% for participants whose formula rate is determined under par. (e) 4.,
3of the participant's final average earnings plus the amount which can be provided
4under pars. (c) and (d) or, if less, shall be in the monthly amount equal to the sum
5of the amounts determined under pars. (c), (d) and (e) as modified by par. (f) and in
6accordance with the actuarial tables in effect on the annuity effective date. If the
7participant has creditable service under both par. (e) 4. and another category under
8par. (e), the percent applied under this paragraph shall be determined by multiplying
9the percent that each type of creditable service is of the participant's total creditable
10service by 85% and 65%, respectively, and adding the results, except that the
11resulting benefit may not be less than the amount of the normal form annuity that
12could be paid based solely on the creditable service under par. (e) 4.

SB449,15,2014 40.23 (4) (a) Subject to all requirements under the internal revenue code, the
15department shall distribute to the participant the entire amount that is credited to
16the account of a participant under the Wisconsin retirement system no later than the
17required beginning date, unless the department distributes this amount as an
18annuity or in more than one payment. If the department distributes this amount as
19an annuity or in more than one payment, the department shall begin the distribution
20no later than the required beginning date.

SB449,16,221 (b) In the calendar year immediately preceding the calendar year of a
22participant's required beginning date, if the department distributes the amount that
23is credited to the account of a participant under the Wisconsin retirement system in
24a form other than as a lump sum payment, the department, subject to all

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1requirements under the internal revenue code, shall calculate the distribution to the
2participant according to one of the following:

SB449,16,43 1. The life of a participant or, if the annuity is in the form of a joint and survivor
4annuity, the joint lives of the participant and the named survivor.

SB449,16,85 2. For an annuity authorized under s. 40.24 (1) (f), a term certain not to exceed
6the life expectancy of the participant or, if the annuity is in the form of a joint and
7survivor annuity, the joint life expectancies of the participant and the named
8survivor.

SB449,16,219 (c) If a participant during the calendar year in which he or she attains 69.5
10years, or the alternate payee during the calendar year in which the participant
11attains 69.5 years, does not apply before December 31 in that year for a distribution
12of the amount that is credited to the account of a participant under the Wisconsin
13retirement system, the department shall begin, effective the following January 1, an
14automatic distribution to the participant or alternate payee. If the department
15makes an automatic distribution under this paragraph, the beneficiary designation
16filed with the department before the date on which the department begins the
17automatic distribution is no longer applicable under ss. 40.71 and 40.73. Unless the
18participant or alternate payee files a subsequent beneficiary designation with the
19department after the date on which the department begins the automatic
20distribution, the department shall pay any death benefit as provided under s. 40.02
21(8) (a) 2.

SB449,17,422 (d) If a participant dies after the department begins to distribute the amount
23that is credited to the account of a participant under the Wisconsin retirement
24system, but before the entire amount in the account has been distributed, the
25department shall distribute the remaining portion of the account at least as rapidly

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1as is provided in the manner of distribution selected by the participant. If the
2beneficiary does not apply to the department to continue the distribution, within a
3period specified by rule, the department shall pay the remaining distribution to the
4beneficiary as a lump sum.

SB449,17,155 (e) If a participant dies before the distribution of benefits has commenced and
6the participant's beneficiary is the spouse, the department shall begin the
7distribution within 5 years after the date of the participant's death. If the spouse files
8a subsequent beneficiary designation with the department, the payment of the
9distribution may be deferred until the January 1 of the year in which the participant
10would have attained the age of 70.5 years. If the spouse does not apply for a
11distribution, the distribution shall begin as an automatic distribution as provided
12under par. (c). If the spouse dies, but has designated a new beneficiary, the birth date
13of the spouse shall be used for the purposes of determining the required beginning
14date. The department shall specify by rule all procedures relating to an automatic
15distribution to the spouse. These rules shall comply with the internal revenue code.

SB449,17,1816 (f) If a participant dies before the distribution of benefits has commenced and
17the participant's beneficiary is not the spouse, the beneficiary shall do one of the
18following:

SB449,17,2019 1. Elect a lump sum payment by December 31 of the 5th calendar year after the
20date of the participant's death.

SB449,17,2221 2. Elect an annuity benefit, not to exceed his or her life expectancy, by December
2231 of the calendar year after the date of the participant's death.

SB449,17,2523 (g) Nothing in this subsection shall be construed to create any benefit, lump
24sum payment option or form of annuity not otherwise expressly provided for in this
25subchapter.

SB449,18,142 40.24 (1) (f) From accumulated additional contributions made under s. 40.05
3(1) (a) 5. only, an annuity certain payable for and terminating after the number of
4months specified by the applicant, regardless of whether the applicant dies before or
5after the number of months specified, provided that the monthly amount of the
6annuity certain is at least equal to the minimum amount established under s. 40.25
7(1) (a). The Subject to the period of distribution required under s. 40.23 (4) (b) 2., the
8number of months specified shall not exceed 180 and shall not be less than 24. If the
9death of the annuitant occurs prior to the expiration of the certain period, the
10remaining payments shall be made in accordance with s. 40.73 (2) without regard to
11any other annuity payments payable to the beneficiary. An annuity under this
12paragraph may be initiated prior to any other annuity amount provided under this
13subchapter and prior to age 55 if all other qualifications for receiving an annuity
14payment are met.