(5) Rejection of DRO.
(a) Rejection and notice. The department may not honor any order to divide Wisconsin retirement system benefits which it determines is not a QDRO as defined in s. 40.02 (48m), Stats. The department shall send written notice of its rejection of an order to the person submitting the order and to the participant and alternate payee if those persons' current names and addresses are stated in the order or are readily determinable from department records.
(b) Participant’s account already closed. A QDRO or order to vacate received after the participant's account was closed by payment of a lump sum benefit on or after the decree date has no effect, regardless of whether the participant returned to participating employment after the decree date. If the participant's account to which the QDRO applies is subsequently restored under the provisions of s. 40.25 (5), Stats., because the benefit was paid in error, or under an agreement approved by the department where the full amount of the benefit paid plus monthly interest at the assumed rate has been paid to the department, the restored account shall be divided according to the QDRO.
(c) Alternate payee’s account already closed. An order to vacate or an amended DRO received after the alternate payee’s account was closed by payment of a lump sum benefit has no effect.
(d) Participant or alternate payee deceased. A QDRO received after the participant's or alternate payee's date of death has no effect on the participant's account or annuity.
(6) Limited grace period to correct specified errors.
(a) If the department rejects an order for the division of a participant's account and subsequently receives an otherwise acceptable application from the participant for a benefit which would close the participant's account due to payment of a lump sum benefit, the department shall delay payment of the lump sum benefit until 30 days after the date the order for division was rejected. This paragraph applies only if the basis for the rejection was one or more of the following:
1. The order did not meet all of the requirements in s. 40.02 (48m), Stats.
2. The order received by the department was not a certified copy or was not signed by the judge or a duly authorized family court commissioner.
(b) If the department has not received a second QDRO within 30 days after the rejection, then the department shall complete processing the application for benefits and sub. (5) (b) shall apply.
(7) Effect of post-decree date corrections and adjustments.
(a) Service purchased after decree date. Credit for service purchased by the participant after the decree date in a QDRO may not be affected by that QDRO.
(b) Active military service. If the department divided a participant's account per a QDRO without first receiving proof and certification of active military service, as provided in sub. (3) (d), and the participant subsequently provides documentation of active military service and the certification on the form prescribed by the department, the department shall divide the military service creditable based on services rendered prior to the decree date between the participant and alternate payee's accounts pursuant to the QDRO. Any resulting adjustments to the alternate payee's and participant's benefits shall be made retroactive to the respective benefit effective dates. The participant may not receive creditable military service for any active military service that would have been granted to the alternate payee had the participant submitted timely to the department the certification of active military service as provided in s. 40.02 (48m) (f), Stats.
(c) Other corrections and adjustments directly affecting benefits. The effect of any other corrections and adjustments to service, contributions, or interest earnings affecting the benefits the participant accrued as of the decree date, including corrections of administrative errors and corrections or adjustments of any factor affecting the calculation of an annuity to be divided, shall be divided between the participant and the alternate pursuant to the QDRO. The participant and alternate payee accounts or annuities shall be adjusted accordingly. However, the department shall not adjust benefit amounts if the amount of the adjustment would be less than the thresholds specified in s. 40.08 (7) (a), Stats.
(d) When a participant's annuity is divided as provided in sub. (4) and retroactive payments are due to an alternate payee, or when an alternate payee's annuity must be increased retroactively for any reason, no interest as specified in s. 40.08 (7) (c), Stats., is payable to the alternate payee for any monthly payments payable prior to the month in which the department received the QDRO.
(8) Compliance with section 415(b) of the internal revenue code. (a) The aggregate benefits paid to the participant and alternate payee shall not exceed the benefit limits under Section 415(b) of the Internal Revenue Code. The department shall make any necessary adjustments to the participant's and alternate payee's benefits on an equitable pro rata basis to assure compliance with Section 415(b) of the Internal Revenue Code. Benefits derived from employee contributions that are actually paid by the employee shall not be subject to the benefit limitations under this subsection.
(b) If the participant's retirement annuity has been divided per a QDRO under s. 40.08 (1m) (b) 2., Stats., any subsequent adjustments necessary for compliance with Section 415(b) of the Internal Revenue Code that result from either post-retirement annuity adjustments under s. 40.27 (2) or 40.28 (2), Stats., or from increases in the compensation limits specified in Section 415(b) of the Internal Revenue Code, shall be prorated based on the percentage of the participant's account that was awarded to the alternate payee in the QDRO.
(c) If the participant's account is divided as provided in sub. (3), any benefit adjustments required under Section 415(b) of the Internal Revenue Code shall be applied as follows:
1. If the alternate payee's benefit becomes effective prior to the participant's benefit effective date:
a. If the aggregate benefits that would be payable to both the alternate payee and the participant on the alternate payee's benefit effective date do not exceed the maximum benefits that would be payable to the participant under Section 415(b) of the Internal Revenue Code if the account had not been divided, the alternate payee's benefit will not be reduced.
b. Any subsequent benefit adjustments necessary for compliance with Section 415(b) of the Internal Revenue Code will be applied solely to the participant's benefits and shall not affect the benefit amount payable to the alternate payee.
2. If the participant's benefit becomes effective prior to the alternate payee's benefit effective date, or the participant's and alternate payee's benefits become effective on the same date:
a. If the aggregate benefits that would be payable to both the participant and alternate payee on the participant's benefit effective date exceed the maximum benefits that would be payable to the participant under Section 415(b) of the Internal Revenue Code if the account had not been divided, the adjustment to participant's annuity shall be prorated based on the percentage of the participant's account that was not awarded to the alternate payee in the QDRO.
b. When a benefit is subsequently paid to the alternate payee, the portion of the total adjustment necessary for compliance with Section 415(b) of the Internal Revenue Code that is applied to the alternate payee's benefits shall be prorated based on the percentage of the participant's account awarded to the alternate payee in the QDRO.
3. If the participant's benefit effective date is on or after the alternate payee's benefit effective date as specified in subd. 2., and as a result of either post-retirement annuity adjustments under s. 40.27 (2) or 40.28 (2), Stats., or of increases in the compensation limits specified in Section 415(b) of the Internal Revenue Code, subsequent benefit adjustments are necessary for compliance with Section 415(b) of the Internal Revenue Code, such adjustments shall be prorated based on the percentage of the participant's account that was awarded to the alternate payee in the QDRO. (d) For the purposes of determining the aggregate benefits payable to the participant and alternate payee under par. (b), the department shall:
1. First calculate the present value of what the participant's benefit would be as of the benefit effective date of the participant's or alternate payee's benefit effective date, whichever is earlier, as though the participant's account had never been divided by a QDRO.
2. If that total aggregate benefit amount is higher than the maximum benefits permitted under Section 415(b) of the Internal Revenue Code, the department shall reduce the aggregate benefits to the maximum amount payable under Section 415(b) of the Internal Revenue Code. The present value of that maximum benefit payable shall be divided between the participant and alternate payee in proportion to the percentage of the participant's account that was awarded to the alternate payee. The benefits payable to the participant and alternate payee shall then be adjusted as follows:
a. If the alternate payee has received a lump sum benefit under s. 40.25 (1) or (2), Stats., the gross amount of the alternate payee's lump sum payment shall be subtracted from the present value of the participant's maximum benefit payable under Section 415(b) of the Internal Revenue Code calculated under par. (d). The present value of the benefit paid to the participant shall not exceed the remainder of the present value of that maximum benefit payable under Section 415(b) of the Internal Revenue Code.
b. If the alternate payee has previously taken a monthly retirement annuity, the present value of the alternate payee's annuity as of the alternate payee's annuity effective date shall be subtracted from the present value of the participant's maximum benefit payable under Section 415(b) of the Internal Revenue Code. The present value of the benefit paid to the participant shall not exceed the remainder of the present value of that maximum benefit payable under Section 415(b) of the Internal Revenue Code.
c. If the participant's benefit becomes effective prior to the alternate payee's benefit effective date, the present value of the benefit paid to the participant shall not exceed the maximum aggregate benefit calculated under this paragraph minus the present value of the benefit payable to the alternate payee as of the participant's annuity effective date.
SECTION 28. ETF 60.60 (8) (d) is amended to read:
ETF 60.60 (8) (d) An insured surviving spouse, domestic partner, or dependent child may not continue payment of premiums from the conversion account after the death of the insured but may elect, if otherwise eligible, to continue coverage as provided in s. ETF 40.01. SECTION 29. ETF 70.03 (4) is amended to read:
ETF 70.03 (4) Evaluate the performance of the primary administrator, annually biennially, to determine contractual compliance and compliance with standards as established under sub. (3).
SECTION 30. ETF 70.08 (3) (intro.), (a) (intro.) and 2., and (b) (intro.) and 1. are amended to read:
ETF 70.08 (3) (intro.) Based on the board's review required under s. ETF 70.03 (10), the board may determine that an investment product offered by the primary plan or an alternate plan is no longer acceptable for inclusion in the program. If the board decides to remove an investment product from the plan as a result of the product's failure to meet the criteria as established under s. ETF 70.03 (9), the product shall be phased out of the primary or alternate plan in a 2-step process over a 12 month 90-day period that shall commence on the first business day of the sixth third month following the board's decision, as follows: (a) (intro.) Phase 1 of the investment product termination process shall last for 6 months 45 days during which time current members and employees newly enrolling in the primary or alternate plan shall be informed in writing that the terminating investment product does not meet board's evaluation criteria and that this investment product is not open to new enrollments., and all of the following shall occur:
2. At the end of the 6-month 45-day period, the board shall instruct the administrator to automatically redirect any member's deferrals that have not been redirected to an alternative investment product from the terminated product into a board designated alternative investment product offered by the primary or alternate plan.
(b) (intro.) Phase 2 of the investment product termination process immediately follows the first 6-month 45-day period and provides an additional 6-month 45-day period during which time members shall transfer existing balances from the terminating product to another investment product offered by the primary or alternate plan., and all of the following shall occur:
1. If at the end of the 6-month additional 45-day period, any member has failed to move a remaining account balance from the terminated fund, the board shall instruct the administrator to automatically move that member's account balance into a board designated alternative investment product offered by the primary or alternate plan.
SECTION 31. EFFECTIVE DATE. This rule shall take effect on the first day of the month following publication in the Wisconsin Administrative Register as provided in s. 227.22 (2) (intro.), Stats.
